Big problem with new pension pay rise
PENSIONERS have received a pay rise this month, pushing their fortnightly rate above $900 for the first time.
However, deeming rates are again unmoved, annoying hundreds of thousands of retirees who Centrelink judges to be earning more income than they actually are.
Deeming - the threshold used by the pension income test when measuring financial assets such as cash or shares - is still at 1.75 per cent for the first $52,000 of a single pensioner's assets and 3.25 per cent on amounts above that.
It hasn't moved since 2015, despite savings account interest rates dropping more than 30 per cent.
The Federal Government says it reviews deeming rates on an ongoing basis, and sets them "with regard to the returns available in the market from a variety of financial investments that includes deposit accounts and term deposits, shares and managed investments".
However, retirees choosing conservative investments such as cash in the bank may lose some pension through deeming of their interest income.
Goldsborough Financial Services director Brenton Miegel said many retirees were worried about higher-risk, higher-return assets, especially after last month's share market volatility.
"Almost without exception, pensioners are disappointed with the level of the upper threshold for deeming, particularly when the best they can get from a bank is between 2.5 and 3 per cent," he said.
Retirees can lessen the impact of deeming by owning higher-income assets such as shares, property trusts or corporate bonds, or reducing their Centrelink-assessable income by gifting money or spending it on travel or renovations.
"I never advocate spending for spending's sake," Mr Miegel said.
He said people who spent money simply to get more age pension were often losing the ability to generate more income that the pension provided.
Wealth on Track principal Steve Greatrex said other popular ways to reduce assessable assets included funeral bonds or moving money into a younger spouse's superannuation if they were under pension age.
He said recent deeming decisions were likely to prompt retirees to invest for more income and growth. "From a policy point of view, you don't want the system to incentivise everyone to have money in the bank and not working for you," he said.
"A lot of us are going to live longer than we expect. If you don't have some growth assets, you may find that the money runs out."
The full rate of age pension rose on March 20 to $907.60 a fortnight for a single pension, up $13.20. For couples, each member's pension rose $9.90 to $684.10 a fortnight.
"A lot of people may disagree with me, but if you are getting the full pension, and are fairly frugal, it's quite a generous payment," Mr Greatrex said. "If you really don't have much money you are going to be looked after."