Government drops deeming rate

While the vast majority of the population eagerly awaits news of another rate cut, spare a thought for those whose income depends on interest-bearing deposits. Namely, pensioners who from today have to cope with a big drop in the deeming account rate.

The deeming rate is set by the government, and as of 20 March, will be reduced from 5.00 per cent down to 4.50 per cent on amounts over $30,400. The rate of 3.00 per cent for amounts under $30,400 remains unchanged. Most institutions have passed on this cut to customers immediately. This follows the reserve Bank’s interest rate cut of last December. The wise pensioner might be thinking of placing a portion of their money in a term deposit, several of which are paying much better rates than deeming accounts.