Skip to main content

Age Pensions and Deeming

With the recent lowering of the cash rate by the Reserve Bank of Australia (RBA) there has been renewed concerns over the Centrelink deeming rates applied for the age pension. 

We have discussed this topic before and suggested that while it is a relatively simple mechanism to ‘average’ the various investments returns, we are concerned with the growing discrepancy between the applied rate and the cash rate.

The current (May 3 2016) RBA cash rate is 1.75% while the Centrelink deeming rate continues be as high as 3.25%. While even the most common term deposit rates are less than 2.5%. Four years ago there was virtually no difference between the cash rate and the highest deeming rate. The result? Pensioners are receiving less!

Some of the arguments put forward by those supporting the 3.25% rate include:

Q. “Commercial superannuation returns are more than 7%, what’s wrong with 3.25%?”
A. Super ‘funds’ generally recommend a more conservative fund balance balance for those in retirement. If we use web sites such as Super Ratings we can see that the majority of super funds reported on this site have a return rate of less than 2% for the last 12 months. This site also reports that those funds largely exposed to the share market report negative returns. It should be noted that these returns are also gross returns.

Q. “The Government sets the deeming rate based on the CPI. Isn’t that the fairest benchmark?”
A. Of course the Government’s decision is based on advice from the Department of Human Services and Centrelink. Also the deeming rates consider the simple Consumer Price Index (CPI). However, that index does not usually reflect costs of the age pensioner. That is why the Government has a number of price indexes. The one that covers age pensioners is the Selected Living Cost Indexes.

Of course also remember that on the Jan 1 2017 the Government is reducing the deeming rate thresholds - further negatively impacting on age pension payments.

Comments

  1. I am 79yrs of age. I have been collecting AMP Disability Benefits of $2200 monthly. My assets are about $105,000. I own my own home. The insurance benefits I collect are on a disabilty policy I took out when I was self employed. Centrelink sees that as "workers Comp" and for some reason they double its value?? I cannot get a part pension. I have been offered a payout by AMP of about $80k. Centrelink tell me they calculate that, 'before tax', I will have to live on that on that for about twelve months before I am eligible for a full aged pension. That will leave very little money left over. The whole thing seems unfair to me. What is the point in me accepting the AMP payout?

    ReplyDelete

Post a Comment

Popular posts from this blog

Contacting Centrelink

Various news outlets reported on the 11/1/17 that the human services minister, Alan Tudge, said “…I know that the call wait time for Centrelink can be long, the average call wait time at present is about 12 minutes…” and “People can also go to a Centrelink office and typically they’ll be able to see a person, in person, within 10 minutes.” Now this is a significantly different to that reported by Centrelink staff and that which has been presented at Senate enquiries. The Australian National Audit Office reported that in 2013-14 13.7 million callers hung up after waiting for as much as 1 hour. From all reports the current situation is now far worse; especially since the average age pension claim processing times have gone from an average 6 weeks to 4-5 months! Now let’s test those ‘access’ times. It’s unlikely to be statistically significant, but it may give an idea of how a ‘typical’ Centerlink recipient needs to handle the situation. We are going to work with an age pensione
After the robo-debt debacle, here's how Centrelink can win back Australians' trust This article was originally published on  The Conversation . Read the  original article .                   Australia’s social security policy and service delivery system is not designed to put customer needs first.         AAP/Julian Smith         Paul Henman , The University of Queensland   The ongoing furore over Centrelink’s automated debt recovery program has highlighted a perfect storm of poor and worsening service delivery in the federal government’s premier service delivery agency.   The extent of Centrelink’s customer service delivery problems is legendary, and it has been getting worse over the last decade. There are several reasons for this, including policy changes and funding cuts. But while the situation may look dire, there are ways Centrelink can win over dissatisfied Australians. Worsening wait times and customer experiences Since its creation in 1997, Cent

Is $0.5m in super really a “small amount”?

When providing advice to a Centrelink age pensioner, a recent article in the mainstream press (7/9/16) suggested “for a relatively small amount, such as $500,000”.  Of course “relative” can mean a number of things and is dependent upon - relative to what. So let’s look at that relativity. First we look at what $500k in super means to a single age pensioner – as was the case for the press article. Let’s assume that this was the total amount of assets held by the age pensioner. The age pension would be reduced from $870 to approx. $440pf for that “relatively” small amount. In 2017 that age pension is expected to be reduced by a further $7,700 pa. A weekly loss to the age pensioners 'budget' of nearly $150 per week from the current 2016 pension. Back to judging whether that $500k is a relatively small amount. In December 2015 the Association of Superannuation Funds of Australia Ltd(ASFA) published the report “Superannuation Account Balances by Ag