Retirees tired of being ‘milked’ call for deeming rates change

Retirees are taking a double hit to their income due to government inaction.

Retirees tired of being ‘milked’ call for deeming rates change

The latest Reserve Bank of Australia (RBA) rate cut coupled with the Government’s reluctance to change Age Pension deeming rates means around a million Australian retirees are effectively being short-changed by the Morrison Government, according to a Fairfax report.

Pensioner bodies have accused the Government of again using retirees as a cash cow by sticking with a 2015 decision that assumes high returns on investments such as term deposits. Yet, those returns have been reduced due to a steady string of RBA cuts since 2015.

Pensioners and those on various welfare payments can receive up to $168 a fortnight in income from investments before their payments are reduced.

The Government assesses this income with deeming rates. Currently, the deeming rate for singles is 3.25 per cent for assets over $51,200 and 1.75 per cent for those under that level. The Government assumes certain returns based on the RBA rate, which has fallen from 2.25 per cent in 2015 to 1.25 per cent today. The RBA has indicated that this rate will fall even further in the near future.

Many retirees with money in term deposits and savings accounts now have their income deemed higher than the actual rate of interest paid.

“For retirees with savings of $100,000, which is quite modest, the difference in rates is about one per cent and this can mean a reduction of $20 per week on the Age Pension – an amount that many retirees on a fixed income simply can’t afford to lose,” YourLifeChoices member Betty told us in 2016.

“Why are deeming rates set at 3.25 per cent when the best interest on term deposits is no more than about 2.8 per cent and that may be cut soon. It seems like a steal and something the Government – whoever we end up with – should revise,” she told us again in May this year.

Yet the Government seemingly remains firm in its decision to keep the deeming rates as they stand, saying any reduction would lead to increased pension payments that would cost the economy around $200 million a year.

Franking credits  – a hot topic during the federal election campaign and a Labor policy blamed for the Coalition’s shock return – affect only a small portion of the retirement population, but deeming rates affect the majority, and pensioners are taking a double hit to their incomes – one from falling interest rates and the second from reduced pension payments based on outdated calculations.

It has been suggested that responsibility for setting the deeming rates should be given to the RBA rather than to the Government, as the RBA has no vested interest in keeping deeming rates high. Peak bodies say deeming rates should be reassessed every three months.

Social Services Minister Anne Ruston is reportedly considering a rate adjustment, however, any move would not be made until September at the earliest.

Treasurer Josh Frydenberg said that although interest rates had fallen, affecting millions of retirees’ income, the Government had to take into account other assets that might be bringing in more money than term deposits – even though most part-pensioners hold money in term deposits or at-call accounts.

Would you like to see deeming rates adjusted? Are you tired of being used to bolster the bottom line? Is the Government’s reluctance to change deeming rates another example of looking after big earners instead of the average retiree?

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    COMMENTS

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    24th Jun 2019
    10:55am
    It seems that a government is quite happy to accept when the RBA decides what interest rate is applicable to adjust the speed of the economy although financial institutions do whatever they wish. When governments fix the deeming rate at a figure higher than the RBA, they aren't assisting with what is being attempted to adjust the speed of the economy. The deeming rate should be in line with what the RBA decides is the rate to assist the nation.
    Cowboy Jim
    24th Jun 2019
    10:58am
    As long as we see adverts like the Challenger ones (no guarantee of future earnings or even if you get your own money back in short print) offering up to 7% for several years the Govt will be reluctant to adjust the deeming rate. Our money is in term deposits and on-call accounts. Last time the offer was 2.3% for 6 months, sure that the following time I will only get less than 2%.
    sunnyOz
    24th Jun 2019
    11:09am
    Many older people will only deal with Bank's, that's all they have known. Aren't interested in share markets, and probably don't have enough to set up income streams. Most probably wouldn't because they don't understand it. My late 70's aged brother is single, wouldn't know how to turn on a computer, is financialy illiterate. Has $225,000 in a bank account earning. 75%. He loses a small amount of pension as he is deemed to be earning too much. No way will he change as he simply does not understand or trust what he doesn't know about. Deeming rate definitely needs reassessment, but with the govt, any govt, too happy to see seniors as a cash cow to milk, doubt things will change.
    Paddington
    24th Jun 2019
    11:59am
    sunnyOz, it is so frustrating when some oldies won’t get with the times and accept all the amazing things technology has delivered. I know some too and it is like hitting your head on a brick wall trying to get them to get online and use the resources that are there. It would be so much easier to contact them and keep in touch. All they have is a phone and my brother does not even have his own mobile.
    On the other hand, I know 90 year olds who are adept online. It makes life so much easier and allows them to keep up with the times and take control of their own finances.
    GeorgeM
    26th Jun 2019
    1:00pm
    All of the above are reasons why that idiot Keating should never have introduced Deeming or the Assets test to make it harder for retirees to get a fair pension on retirement. Just one of many nasty things that guy did. If he did want Deeming, it would have been so much easier and logical (no brain, that guy) to have made all Banks set up Deeming Accounts for pensioners / retirees with interest rates exactly matching the Govt's Deeming rates with oversight from the RBA to ensure it was happening.
    TREBOR
    24th Jun 2019
    11:06am
    There is nothing to prevent a government agency from automatically adjusting deeming rates, and checking income from working social security recipients and SFRs etc - for immediate and accurate checking of social security entitlements based on real figures and not on guesswork.

    All that is lacking is the will and the desire to actually fix what have been, for a very long time, outmoded and often highly unfair practices.

    There is a reason for that - it's called keeping the peasants off balance and in a state of insecurity, rather than social security as mandated.
    Anonymous
    24th Jun 2019
    11:19am
    I agree that the practices of various governments have been unfair since deeming rates were introduced in 1991, Bob. I believe that it is a mixture of laziness and ignoring those of us who have reached retirement age. The May election showed government that retirees have a voice as evidenced by supporting Bowen when he told us not to vote for him if we didn't like his franking credit rubbish. What we need to do is make that voice a bit louder so government can hear us loud and clear. As I posted above, the deeming rate should be in line with the RBA, not a mythical figure devised by bureaucrats.
    GeorgeM
    26th Jun 2019
    1:06pm
    Yes, Trebor, it is just Govt strategy (both Liberal and Labor) for "..keeping the peasants off balance and in a state of insecurity, rather than social security as mandated". Also, to help their bottom line and pay for the large tax cuts which the rich, including the politicians, want.
    That strategy has been in action by the Liberal and Labor Tag Teams for many decades (history has been noted severe times in these pages), and yet the foolish Retirees keep voting these anti-Retiree parties back into power.
    Sen.Cit.90
    24th Jun 2019
    11:43am
    Way back in time when Keating introduced Deeming, I fell for the blurb that we should invest in shares. I went to a Finacial Advisor and went into the share market. Dreadful consequences, within 3 months the share market crashed and I lost 90% of my life savings.
    I do not trust the market and only use Term Deposits, therefore, I'm being ripped off by the Government.
    BERRYUPSET
    24th Jun 2019
    2:12pm
    ME TOO!got burned in share markets..TERM DEPOSITS NOW!Lets hope they dosomething
    getting poorer by theday!!!
    GeorgeM
    26th Jun 2019
    1:08pm
    As you will remember, Keating did that too - made the share market crash with the biggest Recession any of us have experienced!
    london
    24th Jun 2019
    11:50am
    MP,s are getting a generous pay increase
    What about pensioners
    How can pensioners be heard when nobody in the government wants to listen
    How about 50% off power bills ,water rates and council rates
    Paddington
    24th Jun 2019
    12:03pm
    Your last sentence is what I want too. The water bill is ridiculous and the gas in winter is as well. It went down to 1.9 in Victoria last night and is still very cold. We need the heating but have to ration it. At least do something about the winter heating for pensioners and people on low incomes.
    Roscoe77
    24th Jun 2019
    12:27pm
    How about if seniors spend some of their capital to make up the $20 lost in deemed interest and the cut to their pensions? Surely the lower balance would eventually increase the pension without any sacrifice to standards of living. The Government is trying to encourage spending rather than saving. Remember, you can't take it with you
    Roscoe77
    24th Jun 2019
    12:27pm
    How about if seniors spend some of their capital to make up the $20 lost in deemed interest and the cut to their pensions? Surely the lower balance would eventually increase the pension without any sacrifice to standards of living. The Government is trying to encourage spending rather than saving. Remember, you can't take it with you
    Heart of the Sunrise
    24th Jun 2019
    12:28pm
    What Morrison, Frydenberg and Ruston refuse to acknowldege, is that most pensioners are not in a position to hold "other assets that might be bringing in more money than term deposits".
    Their views, which are based on their own high income and wealth, are completely out of touch with the harsh reality most pensioners face.
    Old Geezer
    26th Jun 2019
    7:42pm
    Why not?
    Spud
    24th Jun 2019
    12:38pm
    I’m not interested in first mortgage lending to get a return ,in my opinion I might as well go down to the local one armed bandit and gamble my money that way . I locked in 2.25 for 12 months so it will be interesting to see what that rate will be in 6 months time .
    libsareliars
    24th Jun 2019
    12:41pm
    Spot on Spud
    Tood
    24th Jun 2019
    1:54pm
    Already I have had an email from two financial institutions that my interest rate is going down from the pittance it already is
    Colours
    24th Jun 2019
    1:47pm
    This government has a fine brew of indecision and ineptitude as the basis of its actions. It is basically saying to the very vulnerable that they should pull their money out of the banks and gamble on shares, or maybe at the TAB, to get up near deeming rates of return. Meanwhile, their mismanagement will lead to recession and thereby devalue any investments we may make.
    johninmelb
    24th Jun 2019
    2:01pm
    Love the way we just keep going over the same old ground and nothing ever changes.

    We are not going to get what we want. No government will give it to us unless we find a way to form a government that can implement fairer changes for everyone.

    In our dreams. Not going to happen. It is much easier to sit at our computers and carp and criticise. Look at what is happening in Hong Kong where the people do not like what is happening!! They aren't sitting on their hands saying woe is me.
    Cowboy Jim
    24th Jun 2019
    3:07pm
    "Fairer changes for Everyone" means some from one section of the population to the other and I think that has been rejected by the voters last time round. Do you propose we go into the street like Hong Kong people demanding changes? We do quite OK compared with the people under Commie Govts. We even have the luxury to protest against developments like we saw in Brisbane last weekend. There are some of us that are never happy with what they have and want more.
    johninmelb
    24th Jun 2019
    3:49pm
    All I am advocating is that everyone gets a fair go.

    Day after day there are articles here about how pensioners are suffering at the hands of government. We need to fix these inequalities. As people repeat over and over ad nauseum, we have worked most of our lives, we have done out bit, paid our taxes (well most of us anyway) and now it is our time. Of course we cannot expect to live a life of luxury but we don't need to suffer as much as we do.

    I am not an economist, I don't know if the UK system of a pension for everyone over 65 regardless of income would work here. We may not have the population to support the cost. Likewise the idea of universal basic income. But we have problems to fix with pensions, and other income support payments. For starters there are too many and it is too complex.

    That is not the only thing I want to fix. I want government schools to get the lions share of education money, private schools don't need such massive handouts. Once we start educating our kids, reliance on the dole will drop. But, with that comes the problem of jobs, and although it is now anathema to many, we need to re-nationalise some things, and start employing people again, particularly apprentices to give the young a chance.

    In my day in Victoria, the SEC, Gas and Fuel, Railways, Board of Works, State Rivers etc employed thousands of apprentices every year, keeping the kids off the streets and out of prisons. If we are serious about sorting out our problems we have to go back but in a different way. We cannot have government organisations not running as efficient, modern businesses and paying dividends back to the government to invest in infrastructure etc. And we cannot under any circumstances go back to the days of the unions holding the country to ransom with train strikes etc. There has to be a way we can get the best of all possible worlds for everyone - young and old.
    Cowboy Jim
    24th Jun 2019
    4:39pm
    johninmelb - agree with you re your last paragraph but, alas, these days are gone. 1000s of apprentices learning a trade I remember (Bolte and Hamer) was there myself. But today the wages for apprentices would not get an iPhone going for more than 2 days, never mind the kids would not drive an old banger. We were lucky to have a 4 channel TV in black-and-white, a bacalyte radio and happy to have a little trannie (radio) to take to the beach on summer days. If you still live in Melbourne you be sitting on a million dollar property - sold mine in 1985 and last year it was sold for $1.16 million. Only 16 ft by 100 ft land in the inner city. We can never go back!
    GeorgeM
    26th Jun 2019
    1:15pm
    johninmelb. I agree the Age Pension system is fully Broken and now cannot be repaired - too complex, too unfair, too cumbersome for retirees and even Centrelink, and a completely anti-retirees system which punishes earners and savers. I cannot believe, CJ, that you would say "We do quite OK compared with the people under Commie Govts." - is that the level we have come down to? Not comparing any more with the advanced, civilised world?

    The only sensible option now is an Universal Age Pension system, with NO tests other than Age (65 years and Residency (say 15 years). All Retirees should tell the Govt & their own MPs to ensure we are heard in the impending Retirement Incomes Review which the Treasurer is planning very soon.
    johninmelb
    26th Jun 2019
    3:47pm
    GeorgeM, don't hold your breath on this Retirement Incomes Review. You know as well as I do that Governments never hold enquiries into things they don't already know what is going to be revealed. And it is only an enquiry, so probably, and quite deliberately, will not have the power to make recommendations.

    In any case, Governments are never bound to implement recommendations from enquiries anyway. This enquiry will be strictly controlled and stage managed to meet Morrison's agenda, and it is just a sop to keep us quiet.

    Cowboy Jim, yes I live in Melbourne, no I am not sitting on a million dollar property. Own a small unit, probably worth maybe half that on a good day. Any property up for sale is only worth what someone is prepared to pay on the day despite what a real estate agent will tell you.
    GeorgeM
    27th Jun 2019
    12:05am
    johninmelb, I am not holding my breath, however if Retirees don't represent themselves, then they have no excuse to complain when the Govts takes wrong decisions. Too often, one has heard from Govt agencies reviews that they considered all viewpoints, when in fact the apathy of the people (who act like sheep not used to being heard) means that they never got any feedback.

    As Morrison said, he wants people to "get a fair go", he listens to the "quiet Australians", and he also said (rather hypocritically given his changes to the Assets Test) that Retirees should be able to relax and enjoy their retirement without fear (referring to the Franking Credits issue) of rule changes after they planned their retirement. All these words must be quoted back to him and repeated as often as possible - one must live in hope that one day it will lead to sensible change.
    Tricky
    24th Jun 2019
    2:58pm
    The Government are hypocrites, the PM and Treasurer condemn the banks for not passing interest rate cuts to mortgage holders, then rob pensioners, part pensioners and self funded retirees with inflated deeming rates. The government can set a rate for term deposits that is the same as the RBA rate.
    Cowboy Jim
    24th Jun 2019
    3:12pm
    We used to have deeming accounts, remember them? All gone; with lending rates for housing going down to 3.75% I am not surprised the rates for term deposits are this low. If younger I certainly would not have money in terms but at my age I cannot afford to lose the dough again like I did in the GFC.
    floss
    24th Jun 2019
    3:10pm
    What else did you expect from the LNP.You voted them in now you pay the price.
    Cowboy Jim
    24th Jun 2019
    3:16pm
    You'd not get any different treatment from your beloved ALP - never forgive them for the franking fiasco although I no longer hold any shares. A lot of oldies made their retirement decisions with the franking in their calculation. ALP's wish list is straight out of the communist thinking ideology.
    Chooky
    24th Jun 2019
    7:39pm
    So the very un-clever Tim Wilson has woken up many retirees to the free money they didn’t know they could grab. So that $6,000,000,000 cost the health, education, infrastructure budget will quickly blow out to $10,000,000,000. It’s unsustainable and will have to end. Centrelink is receiving calls from retirees asking how to get the free franking credit gift. So those pensioners calling for a change to the deeming rate, it won’t happen. Pensioners, you are subsidising those retirees who receive the free franking credit gifts.
    Arh, and the Libs blame Labor for class warfare when in fact the Libs promote two distinct classes of retirees. Those who get free money and those who get squeezed by deeming rate lockout.
    Cowboy Jim
    24th Jun 2019
    8:40pm
    Very easy comment, Chooky. I have deeming problems like everyone else but I do not confuse them with franking credits I do not get. It is not a sin to have some money in old age and not everyone has to be absolutely destitute to get something back from all the years of hard work. Franking credits are not free, you have to buy the shares first, Chooky.
    Older lady
    24th Jun 2019
    4:21pm
    Yes. Deeming rates should be adjusted. It is only fair.

    24th Jun 2019
    4:37pm
    Don't expect any positive action from any Liberal government.
    Chooky
    24th Jun 2019
    7:26pm
    So who did you vote for? You think the Libs care about pensioners and retirees in general? Silly you. Your vote was all they cared about and you got suckered in my an ad man and his mate the con man. If you’re bleeding it’s your own fault.
    Seenitall
    25th Jun 2019
    3:00pm
    Why anyone on any form of Centrelink Age Pension would have voted for the return of the Morrison Govt. is totally beyond me. Under Labor pensioners would not have been excluded from existing negative gearing nor would any franking credits have been lost and Bill Shorten was offering $1000 every year to go towards dental costs. For God's sake, are there any pensioners who don't have to visit the dentist?
    All I can say to those of us who are receiving a govt. age pension and who voted for salesman Morrison or the Queensland cane toad conman and are expecting a reduction in the deeming rates is, suck it up.
    Karl Marx
    25th Jun 2019
    4:45pm
    Totally agree. The election just highlighted on how gullible & brain dead the majority of voters are especially pensioners. The LNP are now reviewing the whole retirement income, that wasn't mentioned during the election.
    GeorgeM
    26th Jun 2019
    1:28pm
    If you have seen it all, Seenitall, you should know that BOTH Liberal and Labor have operated as a Tag Team and destroyed the Age Pension system, Just to recall the big ones - Fraser (Lib) stole the money out of the Future Fund, Keating (Labor) then shut down that Future Fund and also brought in Deeming Rates for Incomes Test and also the reviled Assets test, Keating also increased Pension Age for women from 60 to 65 (made them Equal!), Swan (Labor) increased Pension Age to 67, and (the nail in the coffin) in Jan 2017 Morrison (as per Abbott / Hockey / Turnbull plans) implemented the revised nasty Assets Test hitting over 420,000 part-pensioners with some losing up to $14,000 per annum income after they had already planned retirement and settled in hoping for life as normal.

    So stop blaming one side, when BOTH these nasty anti-retirees parties are to blame. Two actions are needed:
    a. Immediately / soon, all MUST write to their MPs and the Govt in the proposed Retirement Incomes Review soon to scrap all these broken rules and implement Universal Age Pension (with NO tests as for politicians) from Age 65 and Residency (say 15 years), and
    b. Threaten to, and vote OUT, BOTH these major parties if they continue to not listen to Retirees - we are 20% of the voting population but just haven't been voting sensibly as a bloc and hence have been ignored and trampled on.
    Seenitall
    26th Jun 2019
    7:50pm
    You make a fair point about both sides being equally culpable GeorgeM but I have a particular gripe with Scott Morrison who, as treasurer under Tony Abbott , almost cut my part age pension in half with changes to the defined benefits scheme. He got away with it because only relatively few people were affected . Some now are surprised that there wasn't a legal challenge to what he did especially because the changes weren't grandfathered.
    Morrison clearly regards the age pension as welfare and has openly stated he would like to see the age pension given to only a very few with the vast majority supporting themselves as totally self funded in the retirement fairyland he imagines.
    I totally agree with you on the two actions that must be taken. New Zealand has a Universal Age Pension similar to the one you describe and as a country not nearly as wealthy as Australia they must be doing things much smarter than we do it here.
    Sen.Cit.90
    28th Jun 2019
    10:42am
    G'day GeorgeM,
    I fully agree with you well-written comments.
    possum
    28th Jun 2019
    12:10pm
    this has been a sandal for far too long. The disparity is appalling. A centrelink-employed friend of mine witnessed a previous Minister with this responsibility to declare that he 'had no idea' how the rates were set!

    Could you commence a petition or direct us to any that are already being conducted, please. Possum
    Poppa
    8th Jul 2019
    12:58pm
    If the deeming rates come down will they equal the current rate of bank interest. Any bets here. It would be great though. Looking forward to the result though
    Poppa
    8th Jul 2019
    12:58pm
    If the deeming rates come down will they equal the current rate of bank interest. Any bets here. It would be great though. Looking forward to the result though