In this article, we learn how much you can have in the bank before your pension is reduced.
Let’s start with some of the basics.
What is deeming?
When it comes to assessing income from your financial investments, the Government assumes that you will be earning a certain rate of return, regardless of the actual interest rate that you receive. This system is known as deeming.
Deeming applies to most financial investments, with a few notable exceptions including real estate and business assets.
So, what assets are deemed?
Centrelink use the terminology of ‘financial investments’ for those assets that are deemed. This list includes:
- term deposits
- bank accounts
- shares and managed funds
- loans to family members
- superannuation funds, if you are age pension age
- account-based pensions taken out after 1 January 2015 (or for those account-based pensions purchased before 1 January 2015 where you are not in receipt of Income Support payment from the Government)
Click here for a full list of what is classed a financial investment.
How is your deemed income calculated?
The total value of your deemed assets are added together with the deeming rates then applied to that total.
Example: Fred has the following:
– a bank account with $20,000
– a term deposit with $100,000, and
– a share portfolio worth $30,000
Fred will have a total of $150,000 applied to deeming.
Again, the deeming rates are the assumed rates of return Centrelink are applying to your investments. This simplifies the process of obtaining investment returns from you for each and every investment you own.
What are the current deeming rates?
|Deeming (assumed) Rate||Single Pensioner||Pensioner Couple|
|1.75%||First $48,600||First $80,600|
|SOURCE: Department of Human Services, deeming rates effective from 1 July 2015|
How much can I have in the bank before it affects my pension?
A single pensioner can have financial investments (e.g. bank account, shares) of $152,031 and still receive a full pension. This assumes the only source of income is from financial investments and that the total assets (eg. cars, personal belongings) are below the relevant threshold under the assets test.
How was this calculated?
$152,031 in financial investments:
$ 48,600 x 1.75% = $850.50
$ 103,431 x 3.25% = $3,361.50
Deemed income = $4,212
A pensioner couple can have financial investments of $267,600 and receive a full pension. Again, assuming the only source of income is from financial investments and total assets were below the maximum allowed under the assets test for a full pension.
As mentioned, the above figures assume your only source of income is from financial investments. If you have other sources of income, such as overseas pensions; these don’t fall under the deeming rules. This extra income will reduce the amount that you can have in the bank before it starts to affect your pension.
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Please note: The figures outlined above are intended as a guide only. Whilst we endeavour to ensure that the information is correct, we do not warrant its completeness or accuracy, nor that the material is kept up-to-date.