What’s happening with deeming rates?
Interests rates are now at record lows with the Reserve Bank cutting the official rate to just 0.1%. Deeming rates are now also the lowest they have ever been. The lower threshold is at 0.25% with the upper deeming rate of 2.25% for investments including cash applying above $53,000 for singles and above $88,000 for couples.
How high have they been in the past
In 1996 deeming rates were much much higher. The lower rate was 5% and the upper rate was 7% so today’s low rates should be good news for pensioners shouldn’t they?
In reality, it is not the deeming rates that matter by themselves. What really matters is what the rates are in comparison to what you are actually earning on your investments. Cash rates were also much higher back then so your term deposits were earning a lot more.
So are today’s deeming rates good?
If you can earn 5% on your financial investments then the current rates are good for you as your pension will be less affected than if your actual earnings were used. But many Seniors have their savings in bank accounts or term deposits and as Ian Henscke from National Seniors recently said: “Tell me who in this environment is getting a return of 2.25% on their term deposit bank accounts.”
What does this mean for your entitlements?
If most Seniors are earning less on their investments than the current deeming rates then Centrelink is probably overestimating their earnings. For part pensioners this means they get less Age Pension. So are the current deeming rates fair or should they be lowered? You can make a comment below
Ps If you are thinking of applying for the Age Pension or the Commonwealth Seniors Health Card don’t delay. You might still be able to get the Government’s $250 stimulus payment if you get your application approved by the 27th November. You can check what you are entitled to receive here