Retirement
‘Manifestly unfair’: Age pension deeming rate
1 May’s deeming rate change for pensioners is not enough to combat the grip of the COVID-19 health and financial crisis, an advocacy group has warned.
‘Manifestly unfair’: Age pension deeming rate
1 May’s deeming rate change for pensioners is not enough to combat the grip of the COVID-19 health and financial crisis, an advocacy group has warned.
Just last week, the upper rate for savings and investments balances above $51,800 for a single pensioner fell from 3 per cent to 2.25 per cent, while the lower rate for savings and investments below $51,800 fell from 1 per cent to 0.25 per cent.
National Seniors Australia has previously welcomed the change of rates, but chief advocate Ian Henschke said that in the current COVID-19 context – where the official cash rate is at the record low of 0.25 per cent and billions of dollars of value has been wiped off the stock market – the “latest deeming rate cut is simply not enough”.
“Mayday is the international cry for help when in distress, and that’s how pensioners feel this May day because once again this latest deeming rate cut is simply not enough,” Mr Henschke said.
He highlighted bank deposit rates being at an all-time low, stock market crashes, slashed dividends and vanishing rental returns to illustrate his point.
Despite acknowledging the drop to 2.25 per cent, Mr Henschke queried: “Where do you find a safe place to get that sort of return?”
“Remember you’re deemed to be earning that amount, and your pension is cut accordingly by 50 cents in the dollar for every dollar earned above the threshold.”
According to National Seniors Australia, the rate is “manifestly unfair” and hurts nearly 1 million Australians – more than 500,000 of whom are aged pensioners.
And the 2.25 per cent rate is nowhere near what would be offered to anyone walking into a bank.
Mr Henschke said the deeming rate was too high, “even before the full impact of the COVID crisis hit home”.
Back in March, former treasurer Peter Costello had called out the deeming rate as too high, arguing that “the current rate was pushing pensioners into riskier investments, and that was a problem”, the advocate flagged.
“The current state of the sharemarket and property market shows just how risky the investment environment is outside of a government-backed term deposit,” he continued.
“If it says you can earn 2.25 per cent, then it should offer an investment that gives that return.”
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