Noel Whittaker's Blog A slight rise in the age pension rates, and some small changes to the deeming rates, mean that many pensioners will be slightly better off. Also some retirees who did not qualify for an age pension because they were over the asset test cut-off point may start to qualify because the cut-off points have increased to $844,000 for a homeowner couple and $561,250 for a homeowner single.
The deeming rates for a couple are now 1.75% on the first $80,000 and 3.25% on the balance. For a single pensioner the first $51,200 will assessed at 1.75%, and the balance at 3.25%. The assets that are subject to deeming include bank accounts, shares, managed funds, insurance bonds, debentures, superannuation when the owner has reached pensionable age, and deprived assets such as excess gifts.
For example, if a single pensioner had financial assets totalling $178,000 the income from these would be deemed by Centrelink to be $5017 year made up of 1.75% on the first $51,200 ($896) and 3.25% on $126,800 ($4121).
Deeming rates also affect people with income streams like account based pensions that were started after January 1 2015, and as such have lost the grandfathering provisions.
These rates apply irrespective of the amount actually earned on investments, so pensioners can gain an advantage if they can get safe returns that are higher than the deeming rates. Unfortunately, many pensioners don’t understand this and leave their savings in the “deeming accounts” offered by the major banks.
For pensioners who are prepared to accept stock-market volatility there are also managed funds available that target high yield stocks. They have the potential to deliver high returns, but also have a higher degree of risk. A good financial adviser should be able to recommend appropriate ones for your situation.
The deeming and age pension calculators on my website www.noelwhittaker.com.au have been updated to reflect the new numbers. So, if you think you might qualify do the numbers for yourself.
It’s important to seek good advice. There are strategies such as investing in funeral bonds, and gifting, which may enable a person who does not quite qualify for an age pension because of their assets may be able to get over the line.