Pensioners lose as high deeming rates don’t reflect their income

A recent Herald Sun article on how deeming rates that have not been updated since March 2015 are impacting pensioners income also included commentary from Bob Budreika

What is a ‘deeming rate’ ?

Deeming rates are the amounts that pensioners are assessed to earn on their financial assets such as cash or shares.
Read more about the deeming rule changes from Jan 2015

How does this impact pensioners income?

Deeming rates have not moved since March 2015, but Reserve Bank data shows bank account interest rates have dropped up to 30 per cent. This means that many retirees with low-interest bank accounts are assessed to earn more than they actually receive, potentially resulting in a lower pension.

Retirees unaware of deeming

Planning for Prosperity senior adviser Bob Budreika said many retirees were unaware how deeming could affect their pension payments.

“This is the government subtly saying ‘we are going to cut back benefits but we won’t do it upfront’,” he said.  Mr Budreika said low deeming rates were leading people to take on more risk than they were comfortable with.” He said there were a few ways to lower assessable financial assets, including funeral bonds and gifting money — although there were strict limits in place.

 

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