Deeming is an important part of the income test. Rather than use the actual income you receive, Centrelink assumes a rate of deemed income and applies this to some or all of your investments.
From 20 March 2015, the amount of ‘deemed’ income will reduce. The new deeming rates will be:
|Status||From 20 March 2015|
|Single pensioner||First $48,000||1.75%|
|Partnered pensioner||First $79,600||1.75%|
What does this mean for your age pension?
It’s good news if you receive a part age pension. The lower deeming rate means you may have less income assessed from your relevant investments. So you may be entitled to a higher pension.
The changes will only modestly increase the age pension by up to $83 a year... that’s just over $1.50 a week. So it’s not going to make a big difference to your retirement income—even when you take into account the latest regular pension increase in March.
But what can make a big difference to your retirement income are interest rates.
Low interest rates = low returns
With interest rates at record lows, it’s important to look at what type of investments you hold. If you have your money sitting in any investment that earns interest—like bank deposits, term deposits and bonds—low interest rates mean low returns.
So if you’re relying on these defensive interest-bearing investments for your income in retirement, you could be feeling the pinch.
When you’re retired, it’s important to remain invested in growth assets like shares and property to generate a regular income and potential capital growth. One potential way to achieve this is through an account-based pension.
Talk to your financial adviser about the best way to structure your finances to generate a reliable and sustainable income that will meet your lifestyle needs today, while making sure your money will last the distance through your retirement.
If you don’t have an adviser you can find one here who specialises in helping people just like you.