12 March 2020: Deeming rates cut by 0.5% The govt is lowering pensioner deeming rates to recognise the RBA’s lower interest rates and the low rates being paid by banks and credit unions on term deposits and savings accounts. The deeming rate for the first $51,800 of financial assets is 1% for singles and 3% over $51,800. For couples (with at least one person on the pension), the deeming rate is 1% on the first $86,200 of combined financial assets and 3% on funds over $86,200. Compare savings account rates at InfoChoice and keep up to date with the best savings rates at InfoChoice. Almost half (48.7 per cent) of all Australian households rely on payments from Centrelink to help pay their bills and for almost one quarter (24.2 per cent) of Aussie households, Centrelink is the main or only source of income.* Many of these people are aged pensioners, disability pensioners or single parent pensioners. Pensioners have their Centrelink income adjusted down if they own financial assets that produce income, and that is where the Centrelink deeming rate comes in. What is the Centrelink deeming rate? Centrelink’s deeming rate is the interest rate that Centrelink applies to your assets to estimate your income from interest and investment returns. The deeming rate applies to you if you have one or more savings accounts, term deposits, shares, managed investments, loans or debentures, or an income stream like a superannuation pension. Centrelink uses the deeming rate to adjust the amount of aged pension you are entitled to receive. The deeming rate applies to your assets even if they don’t produce an income, like shares with negative returns, or produce a very low return. If your assets produce a rate of return that is higher than the Centrelink deeming rate, the deeming rate still applies and you get to keep the extra income. What is Centrelink’s current deeming rate? For single pensioners, the deeming rate is currently 1.75 per cent on the first $51,200 of assets ($85,000 for couples). Any assets over these thresholds is deemed to be earning 3.25 per cent p.a. Centrelink’s deeming rate has not been adjusted since 2015, despite falling interest rates and very low returns from bank accounts and term deposits. Which bank is paying the Centrelink deeming rate? In recent years, the deeming rate has not been lowered to reflect the lower returns on savings accounts and term deposits. This means that for many pensioners, Centrelink is ‘deeming’ that they are earning more than they receive in their pockets. An elderly couple living in Perth asked their bank to advise them how to get the (higher) deeming rate from a term deposit or savings account and were told this is “impossible” according to a report in The Senior newspaper. However, it is still possible to get a rate equal or higher to the lower deeming rate. It is even possible, with some research, to find accounts and term deposits with rates that get close, but not quite equal to, the higher deeming rate. Big Sky has three, four and five-year term deposits currently paying 3.0 per cent p.a. (paid annually). Citi is paying 2.70 per cent p.a. on three and six-month terms for new deposits over $100,000 Rabobank’s Online Savings High Interest Savings Account pays a maximum rate of 3.05 per cent for the first four months without requiring regular deposits. Compare savings accounts from Australia’s major banks, credit unions and building societies here. How can I get a rate equal to the deeming rate? The lower deeming rate is 1.75 per cent and the higher deeming rate is currently set at 3.25 per cent. If your savings are sitting in a big bank savings account, you are not getting anywhere near the deeming rate. Commonwealth Bank’s Netbank Saver account has a variable interest rate 0.50 per cent after the 5-month introductory period is over. “Pensioners need to shop around and be prepared to move their money to a new bank or credit union if they want a return that comes close to the Centrelink deeming rate,” said Vadim Taube, chief executive of financial comparison website InfoChoice.com.au. “Particularly if they have assets over the higher deeming rate thresholds because the 3.25 per cent deeming rate can really punish part-pensioners.” Compare term deposit rates, fees and features from Australia’s major banks, credit unions and other financial institutions here. Compare savings accounts from Australia’s major banks, credit unions and building societies here. * Australian Bureau of Statistics 65230 2015-2016. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.