Pensioners out of pocket as Government stalls on deeming rate
Federal Member for Mayo Rebekha Sharkie is again calling on the Government to set up an independent agency to set the deeming rate used to calculate the fortnightly payments for more than a million Australian part-pensioners, including about 6500 recipients in Mayo.
Rebekha's call comes after the Reserve Bank of Australia met this week and dropped the cash rate by 0.25 percentage points.
This means part-pensioners who have bank savings are being penalised further because the Government's deeming rate is considerably higher than existing interest rates.
"The fact that the deeming is constantly out of step with rates of return on cash investments is seriously disadvantaging older Australians who have planned for their retirement and hold many of their assets in cash," Rebekha said.
"I called for the 45th Parliament to set up an independent agency to set the deeming rate and that call fell on deaf ears. I made the same call in July last year and that too fell on deaf ears.
"I asked the Prime Minister in Question Time today what he plans to do about the deeming rate and the answer appears to be the Government is 'working on it'.
"But there's been two changes to the cash rate since the last change to the deeming rate and the Government hasn't done anything.
"This cannot continue. We need an Independent Social Security Commission whose job it would be to set payments such as pensions and part-pensions to keep up with the cost of living and changes in Australia’s economic circumstances."
The deeming rate is an ‘assumed’ rate of return on investments such as term deposits that is set by the Government for the purposes of assessing incomes for a range of pension payments including aged, disability and veterans.
The income testing of the following benefits is affected by deeming:
- service pension;
- veteran payment;
- income support supplement;
- age pension; and
- Commonwealth Seniors Health Card (CSHC).
Since January 2019 interest rates have dropped four times from 1.5 per cent to 0.5 per cent.
The deeming rate has only changed once in the same time period and sits at one per cent (for below threshold rate of $51,800 for a single pensioner or $86,200 for a couple) and three per cent (for above threshold rate).
“Pensioners are out of pocket because we have a system that relies essentially on a rate being set at the whim of a Minister," Rebekha said.
“The Government needs to act immediately on the deeming rate and then set in place a fairer and more equitable system so that we avoid situations like this in the future.”