Pensioners could get boost from deeming rate change

Government set to make a decision lowering the deeming rate


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Social Services minister Anne Ruston with Prime Minister Scott Morrison. Ms Ruston has asked the expenditure review committee to look at deeming rates.

Social Services minister Anne Ruston with Prime Minister Scott Morrison. Ms Ruston has asked the expenditure review committee to look at deeming rates.

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The government is balancing the budget on the backs of pensioners who have their money in savings accounts, say advocates.

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PENSIONERS could be thousands of dollars better off if the federal government goes ahead with changes to asset testing following pressure from seniors' groups and the opposition.

Deeming rates for the pension (the rates the government "deems" or assumes retirees earn on their investments) which are as high as 3.25 per cent depending on an individual's circumstances, were last set in 2015.

Since then, the Reserve Bank of Australia has cut the official cash rate five times to a new record low of just one per cent.

Social Services Minister Anne Ruston has indicated the government is close to making a decision on whether or not to lower the deeming rate.

"(I) have sought some pretty detailed advice which I'm considering and I'm consulting with my other cabinet colleagues," she told ABC radio on Monday.

"We will be making our decision imminently."

While 75 per cent of pensioners aren't impacted by deeming rates issues the minister acknowledged it was an important matter was for the remaining 25 per cent.

At the moment, for singles, the first $51,800 of financial assets is subject to a deeming rate of 1.75 per cent and anything over $51,800 is deemed to earn 3.25 per cent.

For a couple, of which at least one receives a pension, the first $86,200 of combined financial assets has a deeming rate of 1.75 per cent and anything over $86,200 is deemed to earn 3.25 per cent.

Labor social services spokeswoman Linda Burney wants immediate action, arguing pensioners could be up to $3875 a year better off if the rate was brought in line with interest rates.

"There are about 627,000 people affected by this," she told the ABC.

"Pensioners are really angry about this. They are furious and they've got every right to feel that way."

Angry retirees

Angry retirees have been demanding urgent government action on deeming as the Reserve Bank's decision pushes them further into pension poverty.

The deeming rates were set in 2015 by then-social services minister Scott Morrison and have not changed, even though interest from bank accounts and term deposits have fallen multiple times.

The government uses the "deemed" earnings from retirees investments to reduce age pension payments.

Currently most retirees with interest-bearing bank accounts earn no more 0.5 per cent interest and many term deposits are yielding less than two per cent.

Social Services minister Anne Ruston confirmed to The Senior she will be discussing the deeming rates with the committee.

"The Government understands that reductions in the official cash rate impacts on older Australians on fixed incomes.

Seniors' advocates want to see the deeming rates dropped by at least 1.25 per cent for amounts above and below $51.800.

"The government has been banking the difference for more than four years," said Ian Henschke, chief advocate for National Seniors Australia

"To leave the rates unchanged for more than four years while there have been five interest rate drops by the RBA shows the government is balancing the budget on the backs of pensioners who have their money in savings accounts."

"You can't demand - as the Treasurer and PM have both done - that the big banks pass on the full cut when the RBA lowers its rate and not do the same for pensioners. It's not a good look."

Covert pensioner tax

Mr Henschke said if the rate was not dropped by the full 1.25 per cent "then the difference in percentage will be part of the ongoing covert policy of having a 'pensioner tax' on savings accounts.

"You can't have credibility as a government attacking the opposition over a "retiree tax" and then have deeming rates left so high they are a pensioner savings account tax.

"This affects hundreds of thousands of pensioners and also affects tens of thousands more who apply for a Commonwealth Seniors Health Card.

"Josh Frydenberg has announced a review into the retirement income system. He can start here and make a fair independently set deeming rate that is linked to the RBA rate.

"The age pension has become a prime target for federal budget savings, with an ageing population and the overall cost used to justify cutting the number of people receiving the pension." said Mr Henschke.

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