What are deeming rates and how 2025 changes could affect your retirement plans

Deeming rates are changing in 2025

On 20 August 2025, Federal Social Services minister Tanya Plibersek announced changes to deeming rates. Not sure what they are or why they matter? Don’t worry, we’re here to break it down in a simple way without the jargon, so you can stay ahead and make smarter moves for retirement (even if it still feels like a long way off).

Deeming rates explained simply

When it comes to figuring out how much Age Pension you'll get, rather than dig through every bank account or investment everyone has (timely and costly!), the Government use what’s called a deeming rate. It’s a standard interest rate used to estimate how much income your assets should be earning, rather than what you’re actually earning. That estimated income helps determine how much pension support you’ll get to retire with.

Why do we use deeming rates?

Deeming rates are used to keep things fair, treating all financial assets the same, no matter where or how your money's invested. That means:

• If you’re getting high interest on your investments: you aren’t penalised for being savvy. 

• If your returns are lower: you don’t get an unfair advantage. 

From 20 September 2025, the lower deeming rates will rise from 0.25% to 0.75%, while the upper rate lifts from 2.25% to 2.75%¹. These two rates apply depending on how much you hold in financial assets, with lower rates applying up to a certain threshold, and higher rates kicking in above that.

Why are deeming rates going up?

Deeming rates have been frozen for the last few years to protect pensioners during the economic uncertainty caused by the pandemic. Now, with interest rates and markets stabilising, the Government is adjusting deeming rates over a series of phased increases to better reflect what people are actually earning from their financial assets.

Why should I care about deeming rates?

It's may not exactly seem like a thrilling topic, but deeming rates can have a big impact on your future income and affect your pension. With the changes rolling out from 20 September, it’s worth understanding, especially if they could affect your overall retirement plan (or inspire you to start one!). 

Here’s why it matters: 

• When deeming rates go up: the Government assumes you’re earning more from your assets (even if you’re not) and may result in a lower Age Pension.

• When deeming rates are lower: your assessed income is lower too, meaning you could qualify for a bigger pension.

• Increasing the Age Pension: Alongside the deeming rate increase, the Government is also raising Age Pension payments to help with the cost of living. Singles will see an increase of $30 a fortnight and couples on a full pension will get an extra $22.40 each per fortnight.