Now for the bad news for pensioners under the income test.
With the rebalancing of deeming rates a certainty, the actual amount of change will depend on how much deeming rates increase when indexation is applied.
Our tool allows you to estimate the potential impact of increasing deeming rates by 0% (no change), 0.25%, and 0.5% compared to the current 0.75% rate (applying to financial assets below $64,200 for a single pensioner and $106,200 for a couple) and 2.25% (for assets above the threshold). We assume the increase is applied equally to both rates – in reality the government could increase the lower rate differently to the upper rate.
As you would expect, the higher that deeming rates increase, the less that your pension will increase. Beyond a certain point, your pension payment could in fact reduce.
For example, a single homeowning pensioner with $300,000 of assets outside the principal place of residence would experience an increase in their pension of approximately $11 per fortnight if deeming rates were increased by 0.25% – compared to a $22 per fortnight increase if deeming rates aren’t lifted. If deeming rates increased by 0.5%, they would receive small decrease in the pension of $1 per fortnight.
A homeowning couple with $500,000 of assets outside the family home would receive an increase of $16 per fortnight if deeming rates increased by 0.5%, compared to $33 per fortnight with no deeming rate increase. They would receive a decrease of $2 per fortnight if deeming rates increased by 0.5%.