Deemed necessary

Pensioners call for change

PENSIONERS could be thousands of dollars better off if the Federal Government goes ahead with changes to asset testing following pressure from seniors’ groups and the Opposition.

But the Council on the Ageing (COTA) says a new system is also needed for deciding how such changes are made.

Deeming rates are used to calculate how much some pensioners are earning on their financial investments.

The rates were last set in 2015, and are as high as 3.25 per cent depending on individual circumstances. Since then, the Reserve Bank of Australia has cut the official cash rate five times to a record low of just 1 per cent, meaning savings placed in bank accounts are earning less interest.

Social Services Minister Anne Ruston has indicated the Government is close to making a decision on lowering the deeming rate.

“(I) have sought some pretty detailed advice which I’m considering and I’m consulting with my other cabinet colleagues,” she said yesterday. “We will be making our decision imminently.”

While 75 per cent of pensioners aren’t impacted by deeming rates, the minister acknowledged it was a crucial issue for the remaining 25 per cent. At the moment, for singles, the first $51,800 of financial assets is subject to a deeming rate of 1.75 per cent and anything over $51,800 is deemed to earn 3.25 per cent.

For a couple, of which at least one receives a pension, the first $86,200 of combined financial assets has a deeming rate of 1.75 per cent and anything over $86,200 is deemed to earn 3.25 per cent.

Labor social services spokeswoman Linda Burney wants immediate action, arguing pensioners could be up to $3875 a year better off.

Treasurer Josh Frydenberg noted some assets subject to deeming rates have been outperforming bank accounts most susceptible to interest rate cuts.