Pensioners will save thousands of dollars after the government announced that the deeming rate would be frozen for another year. It is one of several cost-of-living improvements outlined in tonight’s federal budget, along with energy refunds for all households and lower-cost pharmaceuticals.
The deeming rate is the rate of return that the government expects retirees to earn on their investments, regardless of the actual return. It impacts how much of a pension retirees can receive, as well as if they are eligible for one in the first place.
The rate has been frozen for the past two years, with the highest rate at 2.25 percent. The administration has prolonged the freeze until June 30, 2025.
Treasurer Jim Chalmers stated that the freeze would assist over 870,000 individuals, including 450,000 persons receiving the age pension.
With interest rates soaring to a 12-year high of 4.35 percent, the government faced some pressure to raise deeming rates. Chalmers had previously stated that the deeming rate “should broadly reflect movements in the cash rate”.
The announcement will be good news for the country’s roughly half a million retirees, who will no longer experience a reduction in their assistance payments due to deeming rates.
According to the Australian Financial Review, single pensioners will benefit by approximately $3,300 from the move.
Amanda Rishworth, Minister of Social Services, stated that the “relatively simple step” will “provide continued relief” to thousands of people receiving income support based on imputed income.
What is the deeming rate?
The current deeming rate for a single person is 0.25 percent on the first $60,400 of financial assets. Anything above this amount is considered to earn 2.25 percent.
The threshold for a couple receiving at least one pension is greater, at $100,200.
What else is in the budget for pensioners?
Cheaper drugs were also on the table, with the government capping the maximum price of medicines listed on the Pharmaceutical Benefits Scheme (PBS) at $31.60 for the next two years.
Pensioners and concession holders will have the cost of their medicines frozen for the next five years, which means they will not have to spend more than $7.70 for medicine.
Pensioners who receive Commonwealth Rent Assistance will see their payments increase by up to 10%. This is on top of the 15% increase delivered in the previous budget.
More generally, the government would provide a $300 energy bill rebate to every Australian family and a $325 relief to qualified small businesses beginning July 1.
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