Face of Nation : Pensioners could be thousands of dollars better off if the federal government goes ahead with changes to asset testing following pressure from seniors’ groups and the opposition.
But the Council on the Ageing (COTA) says a new system is also needed for deciding how such changes are made.
Deeming rates are used to calculate how much some pensioners are earning on their financial investments.
The rates were last set in 2015, and are as high as 3.25 per cent depending on individual circumstances.
Since then, the Reserve Bank of Australia has cut the official cash rate five times to a new record low of just one per cent, meaning savings stashed in bank accounts are earning less interest.
Social Services Minister Anne Ruston has indicated the government is close to making a decision on lowering the deeming rate.
“(I) have sought some pretty detailed advice which I’m considering and I’m consulting with my other cabinet colleagues,” she told ABC radio on Monday.
“We will be making our decision imminently.”
While 75 per cent of pensioners aren’t impacted by deeming rates, the minister acknowledged it was a crucial issue for the remaining 25 per cent.
At the moment, for singles, the first $51,800 of financial assets is subject to a deeming rate of 1.75 per cent and anything over $51,800 is deemed to earn 3.25 per cent.
For a couple, of which at least one receives a pension, the first $86,200 of combined financial assets has a deeming rate of 1.75 per cent and anything over $86,200 is deemed to earn 3.25 per cent.
Labor social services spokeswoman Linda Burney wants immediate action, arguing pensioners could be up to $3875 a year better off if the rate was brought in line with interest rates.
“There are about 627,000 people affected by this,” she told the ABC.
Treasurer Josh Frydenberg acknowledged it has been some time since a change was made, “and since then the interest rates have come down”.
But he noted some assets subject to deeming rates – such as superannuation or managed funds – have been outperforming bank accounts most susceptible to interest rate cuts.
“Some of those returns have obviously been stronger than what we’ve seen at a time of low interest rates from bank deposits,” he told reporters in Melbourne.
COTA is calling not only for the government to adjust the rates, but for the rates to be reviewed every six months against a pre-determined set of benchmarks.
That’s exactly how the pension is indexed to account for inflation twice a year, COTA chief executive Ian Yates said.
“Why is it that this one component of the pension system, which is deeming rates, is not related to an objective basket of measures that gives us a benchmark to adjust it on?” he told AAP.
“It would take the uncertainty for a part-pensioner out of what they’re going to earn.”
Centre Alliance MP Rebekha Sharkie wants the deeming rates decided by an independent authority.
“We need to have an independent body that looks at the deeming rate, but also looks at the adequacy of the pension overall,” she told.
