The Federal Government's new lower deeming rates came into effect today but they're cold comfort to pensioners who top up their income with retirement savings.
The upper rate for savings and investments balances above $51,800 for a single pensioner fell from 3% to 2.25% and the lower rate for savings and investments below $51,800 fell from from 1% to 0.25%.
When the new lower rates were announced in March, peak seniors consumer group National Seniors Australia welcomed the move.
Mayday is the international cry for help when in distress and that's how pensioners feel this May Day because once again this latest deeming rate cut is simply not enough.
- Ian Henschke, National Seniors
However, the organisation's Chief Advocate Ian Henschke said the Reserve Bank had dropped the official cash rate to a record low of 0.25% and the economy was in crisis with billions of dollars of value wiped off the stock market.
"Mayday is the international cry for help when in distress and that's how pensioners feel this May Day because once again this latest deeming rate cut is simply not enough," Mr Henschke said.
"Bank deposit rates are at an all-time low, shares have crashed, dividends have been slashed and returns from rents are vanishing. The world is in the grip of a COVID health and financial crisis."
Mayday is the international cry for help when in distress and that's how pensioners feel this May Day because once again this latest deeming rate cut is simply not enough," Mr Henschke said. "Bank deposit rates are at an all-time low, shares have crashed, dividends have been slashed and returns from rents are vanishing. The world is in the grip of a COVID health and financial crisis.
- Ian Henschke, National Seniors
In a budget submission National Seniors has suggested a "green bond" for retirees to invest in Snowy 2.0.
If not Mr Henschke wants the upper deeming rate dropped again to reflect the cash rate.
The Association of Independent Retirees (AIR) has also expressed dismay at the current situation facing self-funded retirees.
President Wayne Strandquist said retirees who wholly or partially self-funded their retirement were "reeling" from the triple whammy of reduced interest rates, the savage fall in share prices and unintended travel costs.
Mr Strandquist said plunging sharemarkets and reductions in the cash rate by the Reserve Bank was making it diffiucult for retirees to make ends meet.
With share markets around the world plunging due to the coronavirus pandemic and the Russia - Saudi Arabia oil dispute, investments in Australian and overseas shares held by retirees have fallen significantly.
- Wayne Strandquist, AIR
"With share markets around the world plunging due to the coronavirus pandemic and the Russia - Saudi Arabia oil dispute, investments in Australian and overseas shares held by retirees have fallen significantly. While share markets will likely recover in the longer term, many retirees will not be able to stay on the sidelines during the current crisis and have to cash out of investments, at a major loss, to make ends meet," said Mr Strandquist.
Many self-funded retirees had also invested in property and now had no income as tenants said they could no longer pay their rent.
Mr Strandquist said it was likely the situation would force some self-funded retirees onto the pension.
AIR has suggested the government consider issuing special retirement investment bonds which would provide an investment into the economy to help cover the cost of the drought, bushfires, flood and the coronavirus stiimulus package. "These bonds would only be available to retirees and have an interest rate marginally below the interest rate of the pensions loan scheme. This would provide retirees funding their own retirement a return with minimal risk," said Mr Strandquist.
