Yahoo Finance 1 million Aussies set to pocket a $1,053 cash boost – are you one of them?
Around a million Australians, roughly 63 per cent of whom are pensioners, will see up to $804 money back in their pockets every year if they’re single, or $1,053 if they’re a couple.
That breaks down to $31 a fortnight for singles and $4.50 a fortnight for couples.
The Coalition government has announced a reduction in the deeming rate, which is used to calculate how much a pensioner earns on their financial assets regardless of the actual investment return, meaning that some pensioners may be perceived to be earning more than they are.
This calculation is used for the pension income assessment, which then impacts the amount of money one receives on their pension.
On Sunday, Families and Social Services minister Anne Rushton announced a cut to the official deeming rate to 1 per cent from 1.75 per cent on the first $51,800 earnt on a single pensioner’s investment and the first $86,200 of a couple’s investment.
And for investment balances above that threshold, the deeming rates will fall from 3.25 per cent to 3 per cent.
So, for couples who have their income assessed through deeming, it means they’ll see $1,053 more in pensions a year while singles will get $804 more a year.
Speaking to ABC’s Insiders about pensioners, Treasurer Josh Frydenberg said lowering the deeming rates will be “good for them”.
“We're strengthening the arm of about 1 million welfare recipients, including 630,000 pensioners.”
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The cuts, which will apply from September 20 with payments backdated to 1 July, will cost government coffers $600 million over four years and affect pensioners as well as others who receive income-tested payments.
The deeming rate has not moved since 2015.
Senior groups have been lobbying the government to cut deeming rates amid the Reserve Bank’s back-to-back interest rate cuts, which comes as a blow to those who depend on interest on their savings for income.
Will the cuts be enough?
Labor leaders and senior groups have expressed their dissatisfaction at the government’s $600 million deeming rates cut, with some saying the government had moved too late.
National Seniors Australia chief advocate Ian Henschke said the cuts were “a start but not enough”, adding that the Morrison government had “its hands in pensioners’ pockets” in a time that they could least afford it.
“What the government is telling pensioners is that they are earning three per cent on their investments, when most term deposits are not even returning two per cent, how is that fair?” he said.
“Many older retirees, particularly women, rely on bank deposits because they do not have access to the higher returns from superannuation or are uncomfortable with riskier investments like the stock market. They will continue to be punished by higher deeming rates through no fault of their own.”
Shadow minister for social services Linda Burney said the cut was “too little too late”, and that pensioners “were expecting better” after waiting more than four years for an adjustment to the deeming rates.
“The Liberals and Nationals don’t deserve any congratulations. They have been dragged kicking and screaming to this by pensioner groups and Labor. The government has been short-changing pensioners to prop up their budget for years,” she said as reported in the ABC.
Independent umpire needed
Henschke also added that deeming rates had to be set independently, rather than being set by the government of the day.
“It’s too tempting to have the deeming rates controlled by governments who have been using this for too long as part of their budget balancing process,” he said.
“Unless we have a clear understanding of the policy decision making process, this looks arbitrary and even if we do understand the process, it should be set by an independent authority.”
Council on the Ageing chief executive Ian Yates indicated he wanted further discussions on how the deeming rate would be set in the future in order “to remove the current level of uncertainty”.
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