Changes to pensioner deeming accounts

Why isn't the Government acting to protect the Self Funded retirees and the Age Pensioners?

Changes to pensioner deeming accounts

Every now and again YOURLifeChoices receives a question on a topic which is obviously of great concern to our members.

Q. Ian

We received a letter from the Commonwealth Bank (CBA) today which made interesting reading. You may already be aware of what I am about to cover.

Below is the main text for your information. It is in regards to deeming rates on pension accounts. I have no concern in the Government changing the interest rates, if it was indeed the Government doing this, however, I notice the bank is changing its manner of dealing with the interest.

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We're making some important changes to your Pensioner Security Account. Please be assured that all of the great features of your account are here to stay, including no monthly account fee and competitive Interest rates. You can also enjoy peace of mind knowing your savings are secure with the Commonwealth Bank.

What is being changed?
On 1 July 2012, the federal government announced changes to the social security deeming thresholds. The threshold for singles has been increased from $44,600 to $45,400. To make sure that we are aligned to the government tiers, we will be updating our interest rate tiers from 1 September 2012. We've outlined these new tiers below.

Balance Amount (tiers) Interest Rate
Over $45,000 4.50% p.a.
$2,000 up to and including $45,000 3.00% p.a.
Less than $2000 1.25% p.a.


We are also changing the way that we calculate interest on your account to make it simpler and easier to understand. From 1 September 2012 interest will be paid on the portion of your bank balance that falls within each tier at the rate applicable to that tier. For example, if you have $50,000 in your account, you'll earn 1.25% p.a. on the first $1,999.99, 3.00% p.a. on every dollar between $2,000 and $45,400 and 4..50% p.a. for the remaining $4,600. We will also be increasing our bottom tier interest rate from 0.10% p.a. to 1.25% p.a. to help you make the most of your money.

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If you read the third paragraph in regards to how the bank is proposing to calculate the interest, you will see that the interest rate for an account holding over $45,400 will be 4.5 per cent. However that will only be paid on the monies in excess of the $45,400.  Everything else would be marginally less than three per cent.

I recall that the banks, when you reached an amount where the interest increased, used to pay the higher rate on ALL the funds in the account.

Am I mistaken or is this another ruse by the banks to cut into the funds of their account holders? It will certainly give the banks a massive boost in their coffers by not having to pay the higher interest rates on most of the funds held by senior citizens.

Is it only the CBA which is pulling this stunt at the moment or is it all the banks?

Why isn't the Government acting to protect the self funded retirees and age pensioners?

Perhaps it is time for us to start the Seniors Party and arrange for all senior citizens to vote.  After all we are nearly 25 per cent of the population now and we would only need to have the power of veto in the Senate — not actually run the country.

A.

Ian, this will indeed make a difference to the amount of income you receive from your savings and we understand your concern that this is being implemented without any consultation.

Firstly, the Federal Government did implement changes to the Social Security Deeming Thresholds on 1 July 2012. From this date, a deeming rate of three per cent will be applied to the first:

  • $45,400 of a single income support recipient's total financial asset,
  • $75,600 of a pensioner couple's total financial assets,
  • $37,800 of the total financial assets for each member of an allowee couple.


A deeming rate of 4.5 per cent applies to financial assets above these amounts. You can obtain more information on how deeming is applied to accounts from the Centrelink section of the Department of Human Services.

Secondly, we contacted the Australian Bankers’ Association Inc (ABA) to enquire if all banks were implementing the changes to the way in which interest was being paid. This is not the case. The changes detailed in your letter are how the CBA has chosen to respond.

We also contacted the CBA to ask for a response on why it had changed its way of paying interest. The response was as follows:

Commonwealth Bank implemented amendments to deeming accounts to be effective from September 1, which will see tiered rates apply. The rationale was to ensure that the way we calculate interest is simple and easy for customers to understand. As part of these changes all customers will benefit from an increase of our bottom rate from 0.10% to 1.50% and rates.

Ian, we hope this clarifies the position with the changes to deeming thresholds and the payment of interest in your account.

You may however, wish to consider further action. We would suggest that you check the terms and conditions of the agreement into which you entered when you opened your account with the CBA. If it is stated in the agreement how your interest is to be paid, then you can ask the CBA to advise under which clause it has made the changes. You may also wish to consult the Code of Banking Practice, which you can find on the ABA website, for further information on the obligations of your bank to advise or consult you before any changes are made. If you do not receive a satisfactory response, then you can refer the matter to the Financial Ombudsman Service.

You do of course have the right to switch banks. The Government has implemented legislation under the Australian Banking Reforms to make switching banks simpler. As these contentious changes are not industry wide, you may be able to find a bank which will pay you the higher rate of interest on the whole balance of your account. You can find out more about your rights under the reforms at Bankingreforms.gov.au.

Finally, your idea of a seniors party has been mentioned many times before by YOURLifeChoices members and I’m sure such a party would make a formidable opponent in any future elections.

What do you think? Is it time for senior Australians to put their hats in the ring and fight politically for more rights?

Do you have any information on how your bank has elected to pay interest on senior accounts, which may assist Ian with his choice? Or has your bank also opted to make a grab for your money?





    COMMENTS

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    Monty
    2nd Aug 2012
    4:16pm
    A Seniors Party is long overdue. There are many highly qualified, very component people in the "Seniors" age group. I guess that it is a matter of recruiting these people and then getting a common agenda to form a party platform. Obviously, the talent available would be from all political persuasions and it would be necessary for members of a Seniors Party to essentially forgo their previous alliances to form a new party with a new agenda.
    Difficult: YES, Possible:YES. With sufficient motivation Australian seniors could be a force to be reckoned with.
    Who will start the ball rolling? Are there any retired politicians out there who would be interested in another go around with a new outlook? Anyone else? There has to be someone with the necessary skills to make this happen.
    Kali-G
    2nd Aug 2012
    4:23pm
    Hi Monty,
    Some months ago we canvassed this forum and over a few weeks period we only got approx 45 people interested.
    We have prepared a draft constitution etc but with so few people we got nowhere.
    We need people with commitment and ability to get it moving again.
    retroy
    2nd Aug 2012
    4:36pm
    Where do I sign ?
    Henry
    2nd Aug 2012
    4:48pm
    I have been trying to get people to send me their Expression of Interest to start the Australian Grey party, to no avail. Even somebody subscribed to this I publication told me it would be very simple to get 500 people interested: I received around 40-45 and no more.
    If you guys are interested please send your Expression of Interest to australiangreyparty@hotmail.com. Simply say you are in principle interested. Please include your State.
    Let's start again.
    This situation with the Commonwealth Bank makes my blood boil! How dare they treat us as second class citizens.
    Oldie@83
    2nd Aug 2012
    5:46pm
    Enriquito2005, wrote this paragraph in his Post: Quote,"If you guys are interested please send your Expression of Interest to australiangreyparty@hotmail.com. Simply say you are in principle interested. Please include your State".
    Unquote. I have been unable to get in touch with this address either by search or email. What am I doing wrong?
    Pass the Ductape
    3rd Aug 2012
    7:56am
    I think it's pretty obvious why retired politicians would be reluctant to take the job on again and attempting to regain ones sanity might be at the top of the list!
    Nan Norma
    2nd Aug 2012
    4:22pm
    No one is forced to keep their money in an deeming account. If you are on the internet there are many other options.
    Beemee
    2nd Aug 2012
    4:50pm
    And the extra info in your comment is nothing, zilch, nada. You sound like the banks, keep it close to the heart and treat people like mushrooms, keep them in the dark and feed them BS.
    Put your money where your mouth is and share on the how with others who may not be aware there are alternatives.
    Nan Norma
    2nd Aug 2012
    5:08pm
    I'm sure not smarter than anyone else on here. I just started researching on the net. Started by looking up term deposits and went on from there. I was surpised to find there were better terms than the deeming one. And I'm not afraid to switch my money from one bank to another and back again to get the best deal.
    Beemee
    2nd Aug 2012
    5:25pm
    Good for you. I too swap around and I give no loyalty to any one bank. Remember what our mothers wisely said, don't put all your eggs in one basket.
    But I wasn't going to interfere in your post and shed light on what you were saying, it was your post afterall.
    Ta for coming back so quick, many wouldn't bother.
    Now to all who are reading this, take Nan's advice and look for better deals.
    retroy
    2nd Aug 2012
    4:35pm
    We should get together and expose all the banks that dish out shabby treatment to senior citizens.
    Westpac gives a stranger who walks in off the street a better interest rate than they will pay to a self funded retiree who has been with the bank for 35 years and has his hard earned savings in a self managed superannuation fund account.
    This is more despicable treatment of older people who cannot fight back, and other banks are just as bad
    stillman
    2nd Aug 2012
    4:41pm
    Why would you have your money in tis kind of account? This is the least amount Centrelink expects you to get. You can get far better results elsewhere.
    Nan Norma
    2nd Aug 2012
    4:47pm
    Absolutely agree. The banks are all paying more then centrelinks deeming accounts. Just don't use a seniors account.
    thommo
    2nd Aug 2012
    5:21pm
    get over 5% by looking online for a deposit account,nab owns u bank and pays more interest than nab,and lets face it a super account has not been paying for a few years!
    shanners
    2nd Aug 2012
    5:38pm
    Some of the above comments are right on the mark. Just because you are a senior doesn't mean you have to have one of these "special accounts". It's just marketing clap-trap to suck in pensioners and other retirees.
    When it comes to bank accounts, think of yourself like any customer and seek out the best rates, generally available with online accounts.
    My advice is to disregard any account that uses the word pensioner.
    shell24a
    2nd Aug 2012
    5:46pm
    You can also have an online account linked to your deeming account. It pays 3.5% normally but new accounts will get an extra 1.5% making 5% for the next 3 months. They will do the transfer at the bank for your. Only downside is there is a $4 transaction fee.
    Nan Norma
    2nd Aug 2012
    7:27pm
    If you have to pay fees to transfer your money, you're using the wrong bank.
    mbelfer
    2nd Aug 2012
    6:15pm
    Simpler fiddlestix! Who does CBA think they are hoodwinking? The rates paid are set just (and only just) a smidgin over the deemed interest. If one had, say, 50, 75, or 100 thousand in such an account, the actual interest on each of these sums would be $1540, $2665, or $3790 respectively. This menas the actual interest rates are 3.08%, 3.55%, and 3.79% on accounts holding those sums. While far from obvious or simpple, it does camouflage how far below a return of 4.5% the CBA is grqcciously offering its senior customer.
    micky d.
    2nd Aug 2012
    6:34pm
    I'm not too sure about these things but, although the rates being paid by the banks might be a tad lower with a "Deeming Account" they usually offer a "fee-free" account. Doesn't that go a long way to making up for the lesser interest. Surely with small balances in the "Deeming Account". I would assume that as the investment gets larger the "fee-free" aspect will lose its advantage. Be interested in some comment. Thanks.
    suanne
    2nd Aug 2012
    7:53pm
    why not open an extra account linked to your main account and leave your money there. westpac don't charge fees for pensioners and have a good savings plan with 4.5% interest rising as the account grows
    Abe
    3rd Aug 2012
    12:54am
    I don't know why so many stupid people throw their money away on banks. I stopped using banks in 1973 and went to a credit union. Never looked back! Banks have shareholders who suck all the profits away. Credit unions don't have shareholders, so their fees are way,way down below banks. Wouldn't change it for the world.
    ozimarco
    4th Aug 2012
    1:09pm
    Totally agree. I have also banked with a credit union since the seventies and have never looked back. Better interest rates, far fewer fees.
    Smee
    3rd Aug 2012
    8:06am
    I'm a little lost on this one. We have a smallish (less than $75600) investment account with another bank. At the moment we receive 4.6% interest paid quarterly on the whole amount. My wifes age pension is reduced accordingly because of the 3% deeming. Does the CBA have a special investment account called a "deeming" account. Seems to me that the CBA is being typical predictable CBA. Change banks or better still, take Abe's advice and try a credit union. The bank reason given; "...simple and easy for customers to understand. As part of these changes all customers will benefit ...", is a load of hog wash. Only the bank will benefit. It's rude to shout, but once again; CHANGE BANKS.
    Nan Norma
    3rd Aug 2012
    12:34pm
    CBA call it 55 plus
    shell24a
    3rd Aug 2012
    9:03am
    Despite all these personal comments, research them all and more to find the one that suits you best for interest, access and fees. These are the best arbiters to suit yourself. After all, why do you think there are so many places you can put your money.
    shell24a
    3rd Aug 2012
    9:03am
    Despite all these personal comments, research them all and more to find the one that suits you best for interest, access and fees. These are the best arbiters to suit yourself. After all, why do you think there are so many places you can put your money.
    Monty
    3rd Aug 2012
    9:51am
    The above comments are all valid and obviously there are many answers to the question of banks and interest.
    The question of unique representation of the issues effecting seniors really only has one answer: For older Australians to stop complaining and get off their collective backsides and DO something.
    Perhaps the Australian Grey Party is the answer. Contact them; see if what they have to say is what you believe is necessary to make the right changes. I will be.
    Henry
    3rd Aug 2012
    11:36am
    So the CBA is telling us we are all stupid? Yes, that is exactly what they meant when they said: "We are also changing the way that we calculate interest on your account to make it simpler and easier to understand". OF COURSE, why didn't i see it before? we are seniors, therefore we must be all stupid, totally and utterly stupid, away with the fairies, old bastards, ex human beings!!! I'll tell you something: we mustn't let them get away with murder: WE MUST FORM A GREY PARTY! Please, please send me your Expression of Interest which incidently is just that an expression of interest, you want to see and check whether it's a viable idea or proposition, oh sorry I forgot you are a senior, therefore stupid: get somebody from the CBA to explain this to you! Sorry, but I am livid about this.
    Please send your Expression of Interest to: australiangreyparty@hotmail.com . Please include your State.
    Thank you
    Henry Latorre
    Interim Secretary
    Henry
    3rd Aug 2012
    11:57am
    "Dear Monty, Nan Norma, Beemee, retroy, stillman, shell24a, michael dean, mbelfer, Abe, suanne and Smee:
    Ladies and gentlemen: we are all annoyed at what we've heard and read, it is without a shadow of a doubt a total disgrace. We worked all of our life to better ourselves and the country we live in and now that we are seniors we mean nothing to anybody. Well, they are WRONG, we mean a lot to EACH OTHER, therefore we must close ranks and get together to show them one more time that we are not what they think we ARE (in case you forgot what we are according to them is STUPID).
    Look at the Labor party, look at the Coalition, are they representing us? we were all in our time good labor people and also good Liberal/National people, now that we are retirees we are nothing according to all of them. They are all fighting for survival and are not looking around to see what is really happening. THIS IS THE REASON WHY IS JUST THE RIGHT TIME TO FORM A GREY PARTY!!!!!
    Please send your Expression of Interest to australiangreyparty@hotmail.com and ensure to mention your State.
    I will make sure to create all forms as simple as possible, after all we are simple, aren't we!





    "
    bartpcb
    3rd Aug 2012
    2:57pm
    At this point in time, a 'Grey Party' to push the agenda of the seniors would seem to be a really good idea, and given the numbers strategically correct. Who's going to dust off the cobwebs and give it a go though. Those in power are gambling on no organising structure and a potential membership that is divisive.
    Henry
    3rd Aug 2012
    3:28pm
    Dear bartpcb:
    Thank you for supporting the idea of a Grey Party, it is definitely needed and now with all the confusion surrounding all the other parties I believe it's the right time to do it.
    Please send me your Expression of Interest to australiangreyparty@hotmail.com and advise your State.
    Looking forward to receiving it.
    Henry Latorre
    Interim Secretary
    Vince
    3rd Aug 2012
    4:41pm
    I believe it is incorrect in blaming CBA for the Deeming issue. Mr Swan ,the Treasurer,has sole discretion in lowering the deeming rate but in this case ,after the last interest rate reduction he has chosen not to change the deeming percentage. So much for Mr Swan the bank basher -Maybe all pensioners should be Treasurer bashers until they get what is due them-a reduction in the deeming rate percentage.
    Henry
    4th Aug 2012
    12:50pm
    Vince:
    Whilst I agree with your comment I have to ask the following: why giving pensioners a tier deeming account?
    boy'o
    3rd Aug 2012
    5:35pm
    No grab's on my money. I go for short term interest rates (3 months 29days) all the time and on maturity withdraw what you need to pay big bills, but do not take out your original term deposit. That helps with Centrelink @ the time of doing this my Interest rate was 5.650% the best I could get @ the time, this was for over $50,000. Like most pensioners I always look for the best deals for my $$$. By the way my money was in the CBA till I found out a better deal. I wuould not only look at banks look out side the BOX.
    aquatrek
    5th Aug 2012
    8:27am
    no matter what anyone say its all Ju-liars fault
    Henry
    5th Aug 2012
    12:29pm
    Dear aquatrek: I like your Ju-liars fault bit.
    P$cript
    5th Aug 2012
    2:12pm
    Dear aquatrek: As for the "Ju-liars" comment. Are you sure your name isn't Tony A.
    The comments made by Julia was during an election campaign, these are usually called promises, which no one with a brain would expect to be kept, except it is a called mandate. What ever that means in politics. I think you could find without much trouble all pollies could be called liars under your interpretation.
    Henry
    5th Aug 2012
    3:23pm
    Dear aquatrek: My comment was in no way, shape or form meant to be a political answer to yours, simply I thought the way you put it to be very funny - no more - no less.
    Vince
    5th Aug 2012
    4:20pm
    Retirees Hit by Destructive Drop in Real Income
    Retired Australians have been hit hard by a destructive drop in real incomes,at exactly the same time as Federal politicians have handed themselves a 30% pay rise.Our Politicians should spend sometime in the shoes of everyday struggling retired Australians.The retired Australian base are seeing a never ending cost of living increase, like 30% or more for insurance premium,20% for electricity and 5% for health insurance. These crippling cost of living increases come at the same time as virtually every retired Australian experiences a dramatic fall in real income.
    Retired Australians have been hit hard on several fronts.Perhaps the Federal Government is"profiteering from pensioners".
    .With official interest rates falling from 4.75% to 3.5% those relying on interest on cash savings to pay their bills,have watched their income plunge 25% in 7 months.
    . Despite the fall in interest rates the Federal Government has not since late 2010 adjusted the deeming rate used by Centrelink to calculate aged pension entitlements. In 2010 deeming rates were increased from 2% to 3 % and 3% to 4.5%. A similar reduction in deeming rates would immediately give thousands of aged pensioners more fortnightly pension from Canberra.
    .in recent weeks,ex Federal public servants on a CSS Pension were advised their latest CPI indexation increase for their pension would be 0.1 percent.This would mean less than 50cents per week.(CPI is no longer recommended by the Aust Bureau of Stas as an appropriate cost of living measure)
    Retired Australians consider the Government's failure to lower the deeming rate comes at the same time as Federal Politicians have received a 30% pay rise over the last year (it is a little known fact that this 30% pay rise automatically flows through to a 30% rise in pensions of retired Federal Politicians.
    Treasurer Swan can lower the deeming rate at any time, a move that will effectively give elderly Australians more fortnightly pension for the lower returns they are now receiving on their cash deposits.
    For a long time retired Australians have quietly watched their entitlements erode, for many it has reached crunch time. We can no longer sit quietly and watch our real incomes plunge.
    Go to the banks paying the best interest rates and put pressure on your local member regardless of political parties to immediately reduce deeming rates and also replace CPI indexation on CSS pensions to the same index as is used for aged pensions.
    robby
    7th Aug 2012
    3:39pm
    Everybody seems to be upset with the CBA, but very little is being expressed against Centerlink controlled by Wayne Swan. What about the double whammy that has been aimed at the part self funded retiree. Not only has he been hit by a 1.25% drop in income, but he has also been hit by a 1% to 1.5% increase in the deeming rate. In effect, this rip off could cost the superannuant with $350K, more than 1/3rd of his income. Remember that the Labor Party basically represents the interests of the aged pension & the part self funded retiree.
    robby
    8th Aug 2012
    1:39pm
    I have spoken to Ken Innes about the proposal to try to get a Grey Party going again. He has expressed his interest in helping Henry in any way that he can. The problem is that he cannot contact Henry because he is still banned fro this site. Also, I can't work out how to contact Henry because you can't send mail to anybody who is only on latest comments. Henry might like to write direct to Ken on "46143@tpg.com.au"
    Henry
    8th Aug 2012
    2:13pm
    robby:
    My email address is australiangreyparty@hotmail.com and Ken is most welcome to contact me.
    AlanM
    6th Dec 2012
    10:17am
    The first thing I would do is give CBA the boot (we did) and go to a regional like Bendigo Bank.
    Boof
    14th Dec 2012
    5:40pm
    I THINK IT WELL PAST THE TIME FOR A "SENIORS NATIONAL PARTY". WHAT ABOUT STARTING IT "YOUR LIFE CHOICES". I' IN.
    Boof
    14th Dec 2012
    5:41pm
    OR NATIONAL "SENIORS PARTY' THAT SHOULD READ. SORRY. BUT. I'M IN.
    MarLin
    15th Dec 2012
    11:17am
    Much prefer "Seniors Party" to Australian Grey party, but won't waste anyone's time over semantics (aesthetics?). I'm in and will email Henry accordingly - but also a note of caution to Henry and any other Hotmail users that Microsoft have announced the impending closure of Hotmail in the new year (they're migrating users to Outlook). Also agree that CBA are conning us in this instance with their 1.25% on the first $2000 in that deeming account. But they've got lots of other accounts paying higher interest so it pays to shop around (both inside and outside CBA - let's face it, none of the other banks are philanthropists either!). And lastly, I don't think there's much point complaining about the actual deeming rate because the banks (and Centrelink) will always adjust their rates to "compensate" (them, not us) for any adjustment made by Mr Swan or his successor.


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