‘Deeming’ accounts to disappear

ASIC forces banks to come clean on deeming accounts

‘Deeming’ accounts to disappear

Last week the Australian Securities Investment Commission (ASIC) issued a statement bringing some clarity and relief to pensioners who invest their money in so-called bank deeming accounts.

In an attempt to ensure that people receiving an Australian Government pension are not being misled by advertising, promoting the interest rates they will be paid on certain types of savings accounts, ASIC has worked with the banks to revise the rules.

ASIC claims that it had discovered that some banks and ‘mutual Authorised Deposit-taking Institutions’ (ADIs) were employing the term ‘deeming account’ to promote a basic savings account to pension recipients. These accounts were then marketed as having a connection with the Government’s ‘deeming rules’, which form part of the Government’s social security income test. ASIC judged that this connection or linkage could be potentially misleading to consumers, implying that the interest rates were exactly the same as the Government deeming rates.

A three point plan has been created to guide the banking industry, in particular the Australian Banking Association (ABA), including requirements that:

  • the word ‘deeming’ is not used in a savings account name where that might mislead consumers about the interest rates being offered
  • features of these accounts are not described as being ‘comparable to’, ‘compatible with’, ‘guided by’, ‘reflective of’ the Commonwealth Government deeming rates where this is not the case, and
  • where ‘banded’ interest rates are offered, this is clearly disclosed, and information about different bands and the applicable rate is made easily accessible to consumers.

Hot on the heels of ASIC’s announcement came a press release from the ABA claiming the ‘three point plan’ for industry best practice as the ABA’s plan.

What the regulator says.

What is deeming and what are the current rates


Banks caught out on deeming accounts

Being cynical is rarely attractive – skeptical is fine, but cynical sounds world-weary and suspicious. But when the Australian Banking Association tells us that it has created a three-point plan to benefit seniors, I can’t help but wonder if it was the coercion of the regulator which forced it to the brink – or if the banks are getting sentimental about seniors as Christmas draws near.

Deeming rates are contentious at the best of times, as they are a rate level struck by the Minister for Social Services in an attempt to find a useful benchmark against which to assess earnings from financial investments. But to name commercial bank accounts ‘deeming accounts’, regardless of whether they pay the official deeming rate or not, smacks of opportunism. Basically, it would seem that the banks have been found guilty of false advertising. A deeming account may or may not pay interest at the same rate as the official deeming rate. So it is misleading to call it a deeming account and this practice must be dropped as soon as possible, along with advertising that tells Age Pension recipients the rates are ‘comparable to’, ‘compatible with’ ‘guided by’ or ‘reflective of’ the actual deeming rate, if they are not. At one level it is misleading advertising – in old-fashioned parlance, it’s simply lying.

Living on an Age Pension is a tough gig when you consider that the income level is at least $2000 below the poverty line. Being misled about the interest you will be paid only makes matters worse. When the institution misleading the pensioner is earning not millions, but billions of dollars in profit, it’s a downright scandal. So for the ABA to position itself as the ‘good guys’ in working collaboratively with the regulator to create a three point plan and ‘voluntarily agree’ to set things right, it is beyond belief. Banks do not have their customers’ interests at heart; their shareholders are their primary concern. And board salaries and perks seem to come a close second. Righting this wrong has occurred because ASIC finally showed some muscle over misleading advertising – not because the banks saw a need to clean up their act.

What do you think? Have the so-called deeming accounts really been confusing for pensioners and seniors?


    To make a comment, please register or login
    11th Dec 2013
    I'm a little confused. I understood the deeming rate to be a rate at which the government assessed interest on an interest-bearing account no matter what interest rate was being earned. So if the deeming rate was 2.5% and an account was earning 5%, it was only assessed at 2.5% for the purposes of the income test. What would be the point of having a so-called deeming account which just paid the 2.5% when it is possible to earn significantly more without penalty?
    Nan Norma
    11th Dec 2013
    Barney. You are quite right. The problem is that some pensioners think they have to put the money into a deeming account. Right now it's a struggle just to get the deeming amount. The pensioner's saving are losing money now. Worst still if you are asset tested you are losing 75c a week for every $1000. And please people don't start saying anyone asset tested shouldn't complain. That just smacks of jealousy. Some people have just worked hard, and been careful with their money.
    The CBA has will be changing its pensioner accounts next year and from what I can see the pensioners will not benefit.
    Nan Norma
    11th Dec 2013
    Should mention that the 75c a week also applies to insurance policies that you may have taken out decades ago.
    Andy Leucite
    11th Dec 2013
    My wife and I went into That bank after she retired early this year (and I had previously retired) and requested that our savings accounts be converted to deeming accounts. I was puzzled that the account statements were then labelled Pensioner Security accounts. I wonder what that really means now that I read about the tricks that the banks have been up to with pensioners' 'deeming' accounts. I have a sneaking suspicion why the name of the accounts is what it is. But surely the banks wouldn't want to take advantage of their customers…..? Somehow, 'trust me, I am a banker' doesn't quite have the ring that it might have had many decades ago. My grandfather was a banker and I am sure he has rolled in his grave many times at how rightfully cynical many of us are about the retail banking industry.
    Nan Norma
    30th Dec 2013
    Andy, I assume you are talking about the CBA. You will find although a different name it is still paying the deeming rate. At least for now.
    11th Dec 2013
    11th Dec 2013
    So right,

    All bankers are THIEVES.
    They take from ANYONE (especially the poor) without qualification and fatten themselves.

    At least Ned Stole from the rich and gave some to the poor!
    12th Dec 2013
    Yep LENYJAC/patiot...have to agree..they are a hungry pack of bloodsuckers...I think I'll keep my $5 in a powdered milk tin under the bed...
    Tom Tank
    11th Dec 2013
    I dispute one part of the article and that is that Shareholders are the band board's primary concern. The Bank Executives and Board members priority is their inflated salaries and bonuses. Their consideration for shareholders is only to ensure the continuation of the said remuneration packages.
    Customers are there to be fleeced and boy are the banks good at that.
    11th Dec 2013
    The banks getting sentimental about seniors? I don't think so! Their only thoughts are for themselves, ( that is, upper management) and then for the satisfaction of shareholders. They make obscene profits, and then complain that it is not enough, so anything the ASIC can do in the way of regulation to keep them honest would be of benefit to the customer. But I would bet money that the banks are less than happy about any changes that might benefit us rather than them!

    11th Dec 2013
    We are FED by corporate media, the concept, that the wealthy elite are 'leaders of society' when in truth, they are simply GREEDY parasites that are willing to FLEECE anyone to get more money.

    Some of these so called 'leaders' are some of the most dumb ars* and inept people in our society. University Degrees and even Rhodes Scholarships can be PURCHASED if you have enough money.

    The wealthy elite have NO CONCEPT or UNDERSTANDING, that they should actually WORK for their wealth. The aim is to obtain as much wealth as possible, as quickly as possible….by any means available and if not available, use your wealth and power to destroy democratic processes and ensure that it IS available.

    Sorry but that is the BARE BONES of corporate/elite wealth….

    QUESTION is: Can ordinary hard working people still afford these parasites on society? I for one do not think so.

    ANSWER: NATIONALISE, NATIONALISE, NATIONALISE the BANKING industry. This industry is way too important to the welfare of Australia to be left in the hands of INEPT & GREEDY parasites.

    11th Dec 2013

    Although our banks may be 50% Australian owned, the SAME FOREIGN financial institutes/banks OWN substantial shares (over 49% in ANZ) in ALL major Australian Banks. Add this together, these FOREIGN financial institutes/banks OWN and CONTROL a great portion of this Australian Industry. All these major FOREIGN banks have been fined MILLIONS for fraudulent and criminal activities, in their own countries.

    LINK: http://www.spankyourbank.com.au/who-owns-how-much-of-our-banks
    LINK: http://nesaraaustralia.com/2012/07/15/who-owns-the-largest-share-of-australias-top-4-banks/#comment-3673

    DO we really want these parasites controlling Australia? No wonder they are willing to PREY on those that are most vulnerable in society…. that is what Corporations do, especially FOREIGN ones.
    11th Dec 2013
    Quick answer. DON''T use a bank. We've not used a bank since ... um.. oh now, let's see; roughly 1989. Result. Damned good service from Credit Unions, Building Societies or whatever giving reasonable if not outstanding rates (and NEVER less than the deeming rate and in most cases 0.5 to 1.5% above that).
    Go figure.
    12th Dec 2013
    Banks have many vested interests to rob consumers [citizens] of their hard earned money.
    businesses are hypocritical.
    governments/departments which abet them are worse.
    we live in a culture where business is good and government and public interest bad, almost always, and lies said are never assessed later by the electorate.
    banks have worse vested interests than this.
    eg housing loans which abet poor owner risks.
    which are well covered by mortgage insurance or foreclosure.
    13th Dec 2013

    I particularly like "we live in a culture where business is good and government and public interest bad". It is the corporate or 'commercial' media that keep pushing this fallacy, again for their own vested interests.
    18th Apr 2016
    I realise this is an old article but I would love to know how a deeming account works, why we need it, and when we are or are not eligible to receive interest at the deeming rate.
    6th Oct 2018
    I dint jnow why anyone with less that $1milliin wpuld choose to use any of tge 4 big banks. Or their pretend subsideries?
    The retirees best friend i have found .is the super fund.

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