Aged Pensioners benefit from Deeming Rate changes

Deeming is a key part of the Aged Pension social security income test.

It is used to assess income from financial investments for social security purposes like bank account, shares, etc.

Deeming assumes that financial investments are earning a certain rate of income, regardless of the amount of income they are actually earning.

If income support recipients (eg. Aged Pensioners) earn more than these ‘deemed’ rates, the extra income is not assessed at all.

This month the Government announced the deeming rate on the first $51,800 of a single pensioner’s financial investments — and the first $86,200 of a couple’s — would drop from 1.75 per cent to 1 per cent.

The deeming rate for balances above those amounts will change from 3.25 to 3 per cent. 

The end result means that couples whose income is assessed using deeming will receive up to $1,053 extra a year, while singles could pocket up to $804 extra a year.

The change continue to gain public controversy as even at 3%, in a very low inflation rate environment, it is difficult for pensioners to receive rates of return that equal to the deeming rates in bank accounts or term deposits.

It will be interesting to see if additional changes are made in the future. The historical deeming rates can be viewed via this Department of Social Security link.