In November 2013, the Deeming Rate on investment income was reduced from 2.5% to 2% for investments totaling $46,000 for a single pensioner and $77,400 for a pensioner couple. The Deeming Rate is used as a guide to determine how much of the total investment income is assessable when calculating Pension and Allowance payments.
These new rules only apply to pensioners whose sole source of income comes from investments they hold and the lower rates will effectively increase the income many pensioners will receive. The Deeming Rates also encourage pensioners to draw more income from easily accessed sources, such as a savings account.
How will this affect my pension payments?
Under the new threshold, single pensioners with up to $135,800 in investments and pensioner couples with up to $238,200 in investments will still be able to receive the full pension. However, this only applies to pensioners whose only source of income comes from their financial investments.
The good news for pensioners is that there are a number of lower risk investment options in the market that will still provide returns above the deeming rate such as internet based savings accounts and term deposits. Both options can be easily accessible and most financial institutions offer a wide range of products to meet investors’ needs.
If you have any questions on what these new Deeming Rates may mean for you, please don’t hesitate to contact your WealthParnters advisor on 02 9955 1988.