Lower deeming rates boost part age pensions

The Australian Government is changing the way it calculates the income test for the age pension to relieve the cost-of-living pressure on pensioners affected by low interest rates.

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%
  > $48,000 3.25%
Partnered pensioner First $79,600 1.75%
  > $79,600 3.25%

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.


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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.