National Seniors Australia says today’s interest rate cut of 0.25% will all but evaporate any gain pensioners received from the federal government’s decision to ease deeming rates back in July.
The historic new low of 0.75% will be reflected in lower rates of return for pensioners with savings.
However, the federal government’s upper deeming rate (which deems how much pensioners make from their savings investments) remains at 3% and will be almost double the typical return a pensioner can expect on their cash savings.
The higher the deeming rate, the less pension you receive.
National Seniors Australia’s Government Affairs Advisor, Craig Sullivan says today’s interest rate cut will have a devastating impact on pensioners’ savings.
“The government trumpeted its deeming rate cut in July as a ‘bonus’ for pensioners.
“Well there is no bonus now, because returns on savings are going to be even less, yet the government still deems anyone with a balance over $51,800 to be getting a return of 3%.
“I challenge anyone to find a bank willing to offer a 3% return on a term deposit.” Mr Sullivan said.
He says a deeming rate cut would put more money in the pockets of millions of pensioners.
“If the government wants to inject some life into the sluggish economy, then cutting the deeming rate would act as a stimulus and help millions of pensioners who will be doing it even tougher now with this interest rate cut.”
Mr Sullivan says the deeming rate should be linked to the cash rate as it was under the Hawke, Keating and Howard governments.
“Today’s rate cut just shows how inconsistent, inequitable and unfair the upper deeming rate is.
“The government is balancing its budget on the backs of pensioners.” he said.
National Seniors also wants the pension, deeming and tapering rates as well as Newstart set by an independent tribunal to take the politics out of the pension.