Cuts to deeming rates
About 1 million Australians will benefit from a $600 million boost across the next four years following the Morrison Government’s decision to cut deeming rates.
Minister for Families and Social Services Senator Anne Ruston said the changes would benefit about 630,000 age pensioners and almost 350,000 people receiving other payments.
“The lower deeming rate will decrease from 1.75 per cent to 1.0 per cent for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples. The upper deeming rate will be cut from 3.25 per cent to 3.0 per cent for balances over these amounts,” Minister Ruston said.
“Under the new rates age pensioners whose income is assessed using deeming will receive up to $40.50 a fortnight for couples, $1053 extra a year, and $31 a fortnight for singles, $804 a year.”
The extra money will start flowing through into peoples bank accounts from the end of September 2019 in line with the regular indexation of the pension and will be backdated to 1 July 2019.
“While 75 per cent of aged pensioners are not affected by deeming this decision recognises that it is an important issue for those who are,” Minister Ruston said.
“Changes to the deeming rate will also benefit people receiving other income tested payments including the Disability Support Pension and Carer Payment, and income support allowances and supplements such as the Parenting Payment and Newstart.”
According to National Seniors Australia the Morrison Government’s decision to cut the deeming rates on pensioners’ savings is a start but not enough.
The new rates of 1.0% down from 1.75% on savings less than $51,800 and 3.0% from 3.75% on savings above, remains well above the rate pensioners will earn in their bank accounts.
It means the government is still treating them as if they are earning a higher income than what they are actually earning.
“While we welcome the $600 million announcement today, the truth is the Morrison Government still has its hands in pensioners’ pockets at a time when they can least afford it.” said National Seniors Australia Chief Advocate Ian Henschke.
“What the Government is telling pensioners is that they are earning three per cent on their investments, when most term deposits are not even returning two per cent - how is that fair?” he said.
“Many older retirees, particularly women, rely on bank deposits because they do not have access to the higher returns from superannuation or are uncomfortable with riskier investments like the stock market. They will continue to be punished by higher deeming rates through no fault of their own.”
“The lower deeming rate now accounts for four of the five drops in interest since the last adjustment.
“The higher rate accounts for just one of the five rate drops in the last four years and four months.
“What is the justification for doing this?”
Mr Henschke says it also increases the need for deeming rates to be set independently, along with the pension and ‘Newstart’ instead of being set by the government of the day.
“It’s too tempting to have the deeming rates controlled by governments who have been using this for too long as part of their budget balancing process.
“Unless we have a clear understanding of the policy decision making process, this looks arbitrary and even if we do understand the process, it should be set by an independent authority.” he said
15 July 2019.