Last week there was another interest rate cut and talk of more to come. That’s bad news for anyone with a savings account, and doubly so for those being assessed for aged pension eligibility.
While actual rates have dropped like a stone, ‘deemed rates’ have remained fixed. And it’s those rates – set at 3.25% for assets above $51,800 and 1.75% below that figure – which affect the amount of pension you receive.
It’s time this absurdity - this inequitable, punitive situation - was addressed. Because don’t we all wish we were achieving 3.25% interest on our savings?
When Treasurer, Josh Frydenberg, demands that the banks pass on the full interest-rate cut, he should be embarrassed by Government’s failure to take the same equitable approach in-house.
The deeming rate tracked alongside the reserve bank cash rate from 1997 up until about 2010. It was either the same as, or slightly below, the cash rate.
Then in March 2010, that all changed; there was a clear policy decision to place the deeming rate above the cash rate. It’s time to reverse that appalling decision.
The last time the deeming rate was lowered was back in March 2015 when Scott Morrison was the Social Services Minister.
Since then we’ve witnessed a 1.25% drop, with pundits expecting more to come.
Who’s bearing the brunt? Pensioners. At every turn.
The deeming rates must be adjusted. Not least because the government has been banking the difference for more than four years, balancing the budget on the backs of pensioners.
National Seniors Australia is calling the Coalition out on this unfair policy and demanding that all sides commit to taking the politics out of the pension.
It’s time the Government – who fought the last election on fairness – thought more broadly about how to fix the pension system.
We need a comprehensive review of the retirement income system to make it fairer, more certain and sustainable. The review into retirement incomes promised by Josh Frydenberg must include deeming rates and the way we calculate the pension. Because those are among the most unfair ‘retiree taxes’ in play.
However, there is something else that the government can do to take the politics out of the pension. Something that National Seniors, along with the Benevolent Society, has been calling for, for some time.
We need an independent authority to set the deeming rate and the pension rate itself. This new, independent body should also set Commonwealth rent allowances and Newstart. It would set these based on need - not on the need to balance the budget.
The question is not whether the Government has the courage to reduce deeming rates in the short term. This is not courageous, it is just common sense.
The question is whether they are willing to take the politics out of the pension and set the deeming and pension rate independently of their own interests - just like they do for their own pay through the independent Remuneration Tribunal. Ultimately, this is the fairest option.
Learn more about our Fix Pension Poverty campaign and how an Independent Pension Tribunal would work below.