National Seniors Australia has welcomed today’s announcement by the Prime Minister that the upper deeming rate for pensioners will be cut by 0.5% to 2.5%, but says it is still too high.
Australia’s peak consumer organisation for older Australians says the rate, which the government uses to deem what pensioners earn from their investments, is still well above the typical return on what pensioners actually receive.
National Seniors’ Chief Advocate Ian Henschke says the new rate is still balancing the budget on the backs of pensioners.
“While any cut in the deeming rate is welcome, the government is still deeming pensioners to be earning 2.5% on investments in excess of $51,800,” he said.
“No bank is offering anywhere near 2.5% on their term deposits, in fact the Commonwealth Bank has a ‘special offer’ of 1.2% on its term deposit, not even half of what the government deems is the return,” Mr Henschke said.
He pointed out that the higher the deeming rate, the less money pensioners get.
Mr Henschke also referred to comments just this week by one of Australia’s most successful Treasurers, Peter Costello, that the deeming rate is still too high.
“When Mr Costello says the current rate is pushing pensioners into riskier investments, you know we have a problem.
“That won’t change after today’s announced cut, because the deeming rate still acts as a disincentive for pensioners to put their savings into safe investment accounts in banks which come with a government backed guarantee,” he said.
“And the current state of the share market shows just how risky the investment environment outside of term deposits really is.”
Mr Henschke wants the government to go further and slash deeming rates to better reflect the returns pensioners are getting.
National Seniors also wants an independent body to set deeming rates and the pension, to take the politics out of the retirement system.