AMP analysis has indicated part-pensioners will receive a boost in their income from as early as September as a result of the federal government’s decision to drop deeming rates and a scheduled increase in the age pension.
According to AMP’s calculations, part-pensioners who are single could enjoy a lump sum of $178, while couples could receive a lump sum of $234 when the reduced deeming rates come into effect next month.
“Pensioners will have two reasons to smile in September with the scheduled increase to the pension coinciding with the deeming rate cuts. Although the changes for the vast majority of pensioners are relatively small, having some extra money in their budgets to tackle cost-of-living expenses is a positive thing,” AMP technical strategy manager John Perri said.
The government recently announced it will be dropping the higher deeming rate to 3 per cent, representing a decrease of 25 basis points, for individuals with investments in excess of $51,200 and couples with investments of over $86,200.
Further, Canberra agreed to reduce the lower deeming rate, by 75 basis points, to 1 per cent for investments under these two thresholds.
“Deeming rules are used to assess income from financial investments for social security purposes. Deeming assumes that financial investments are earning a set rate of income, regardless of the amount they are actually earning. Deeming applies to most financial investments, not just saving and term deposit accounts, including listed and unlisted shares, insurance bonds and many more,” Perri said.
The move marks the first time deeming rates have been lowered since 2015. Eligible part-pensioners can look forward to a backdated payment on 19 September because the reduction in deeming rates take effect from 1 July 2019.
Concerns had previously been raised about the effect the difference between the official interest rate and deeming rates would have on pensioners’ superannuation assets.
