“Can you recommend a bank or institution where I can deposit my $85,000 at 3% interest?” 

This question was posted by a certain Leah Sheridan in the comments section of the blogpost we published on 15 July discussing the changes in the deeming rules 

Unfortunately, we can’t offer any recommendation to Leah as there is no Australian bank today that will pay you at 3% interest. 

Moreover, some seniors still find the reduced deeming rates unfair, because they are based on assumptions.

Source: Sydney Morning Herald

Should we retain the deeming rates? 

Deeming refers to the set of rules used by Centrelink to work out the returns from your financial assets such as bank savings, superannuation savings, company shares, managed investments, and even gifts or loans. 

The deeming rate is an assumed rate of earning, which will then be included in the income test. Hence, the deeming rules will significantly affect the amount you may receive as your pension. 

The federal government introduced the deeming rates in 1990 as a way to “incentivise” pensioners to seek higher returns for their wealth as it was noted that some pensioners were minimising their actual incomes so they can maximise their pension.

So by looking for revenue channels that pay higher than the deeming rates, pensioners can earn added income that will not be included for the income test. 

But the problem is, there are no available banks as of the moment that can pay more than 3% interest rate. 

Seniors may be able to earn more income by investing in other instruments such as property, bonds, or the stock market.  

Looking for other investments may allow seniors to generate dividends that are higher than term deposits. 

However, you should not invest in any opportunity without understanding the risks first. Consider talking to a qualified financial advisor so you can sort out the available options.

How much are you earning from your current financial assets?  You can share your story in the comments section below. 

To learn more about Retirement Essentials visit our website at www.retirementessentials.com.au or call us on 1300 527 727 during office hours.