Deeming freeze continues – a big win for pensioners
National Seniors Australia pushed for the freeze to continue, and you are the winners.
Ahead of next week’s Federal Budget, National Seniors Australia (NSA) strongly recommended to the Treasurer that cost-of-living pressures were not easing for aged pensioners, and the hand of government should refrain from making matters worse.
A responsible and caring government, we believe, would continue to freeze deeming rates to avoid a real drop in pension income. By doing so, the government would leave more for struggling pensioners in their fortnightly payments.
The government’s decision to continue the freeze is very welcome.
You can read about our full pre-budget recommendations here.
But what do deeming rates do?
Deeming rates are used to estimate income the government deems people earn on financial assets. They impact means testing for support payments, including the Age Pension, JobSeeker, and parenting payments affecting the amount a part-pensioner may receive from Centrelink.
They also impact on eligibility for the Commonwealth Seniors Health Card and are used to determine consumer contributions to aged care, so how they are set have implications for a range of seniors.
NSA Chief Executive Officer Chris Grice says he is very pleased the government has listened to the needs of older Australians impacted by cost-of-living pressures.
“A continued freeze on deeming rates is a great win for common sense and for older Australians,” Mr Grice said.
“Older Australians are struggling to pay competing necessities such as utilities, petrol, groceries, and rent. The continued freeze on deeming rates has spared part-pensioners and other income support payment recipients a drop in income and the loss of the Commonwealth Seniors Health Card and with it, loss of access to valuable concessions.
“The Treasurer’s decision to provide cost-of-living relief by a continued freeze on deeming is a sensible way to help older people meet daily living costs. It is one of 16 key policy recommendations NSA put forward in our 2025 Budget Submission with key focus areas including cost-of-living, health, and aged care,” Mr Grice said.
How deeming rates work
Deeming rates are used in pension income testing to calculate how much income you have made from financial assets, such as cash, term deposits, at-call bank accounts, shares, and units in managed funds and superannuation funds.
Under the deeming rules, you are ‘deemed’ to earn a certain annual rate of return on your financial assets, regardless of the rate of return you actually earn. The deeming rate is set by the Minister for Social Services and is adjusted in line with what financial markets are doing. The deeming rate that is applied depends upon the amount of financial assets you have.
Rates are normally reviewed twice a year to match changes in the market.
For more information click here.
Some background helps us to understand the importance of deeming rates.
Since 2012, government has undermined confidence among retirees by failing to reduce deeming rates in line with previous methodology (prior to 2012 the upper threshold followed the RBA cash rate followed the RBA cash rate).
While the Federal Government periodically reduced deeming rates after 2012, retirees viewed this as only occurring as result of political pressure. There is no logical basis for the change in methodology in 2012, except to reduce budget outlays.
A lifting of the freeze on deeming rates would mean:
- Hundreds of thousands of pensioners would have their pensions cut
- Some Commonwealth Seniors Health Card holders would lose this benefit
- Aged care costs would increase for seniors subject to means testing.
It is likely, that once inflation moderates, deeming rates could again increase. That’s why National Seniors Australia has recommended that government use this time to create a fair and transparent method for calculating deeming rates in the future.
We will continue to push for deeming rates to remain where they are while inflation and the cost of living continues to press on seniors’ lives.
Mr Grice said National Seniors would continue to be vigilant in guarding the wellbeing of all seniors.
“We hope and expect the government continues to listen to the needs of older Australians and creates a fair and transparent way to set rates in the future based on the pre-2012 methodology that tracked the upper threshold with the cash rate.
“NSA will watch with keen interest to see other positive measures the government will deliver for seniors in the 2025 Budget.”
