Page 8 - FWP Wealth-Adviser-Issue-121 (FWP)

ISSUE 121
SEPTEMBER 2025

For retirees with modest financial assets, the change in rates might have
only a minimal effect. However, those with significant savings or close to the

pension cut-off could see their Age Pension reduced—sometimes by as much
as $13 per fortnight for each extra $1,000 of income over the threshold.

Pensioners from increases in the cost of living and ensured Why Does the Government Use Deeming Rates?
their assessed incomes remained lower than actual returns Deeming rates offer several advantages:
for many. • They simplify pension assessments and reduce paper-
From September 2025, rates are rising to more closely work for retirees.
match current market conditions and returns available on • They reward prudent investing—if you earn above the
savings and investments. This change means more income deeming rate, you keep the difference.
will be assessed for many retirees, which may reduce part or • They ensure the system is fair by avoiding case-by-case
full Age Pension amounts—though the Government is also assessments—and limit opportunities for manipulation.
increasing pension payments to help offset rising living costs. However, there are downsides. When real returns are
low, some may find they’re assessed as “earning” more than
The Impact on Your Age Pension they actually receive. Others may see more of their income
How much retirees are affected depends on the size of sheltered under the deeming system than would be possible
their savings and investments, and how close they are to the if assessed individually.
income or asset test thresholds.
For retirees with modest financial assets, the change Who is Most Affected—And Is the System Fair?
in rates might have only a minimal effect. However, those Not everyone is impacted equally. Those with invest-
with significant savings or close to the pension cut-off could ments that consistently outperform the deemed rate are
see their Age Pension reduced—sometimes by as much as effectively rewarded, while conservative investors may feel
$13 per fortnight for each extra $1,000 of income over the penalised. Still, simplicity and fairness were the aims of this
threshold. reform in 1996, and feedback from pensioners is considered
To help offset these impacts, Age Pension rates them- during major changes.
selves are increasing. From September 2025, the maximum The most significant impacts in 2025 will be for:
rate for singles will increase by about $30 per fortnight, and • Retirees with large financial asset holdings, especially if
for couples by $44.80 per fortnight. These boosts will apply close to the income test caps for pension eligibility.
automatically, but may not fully offset higher “deemed” • Anyone depending on the minimum Age Pension whose
incomes for everyone. deemed income now exceeds the threshold.
• Those with low-yield or defensive portfolios that may not
Practical Examples keep pace with the increased deeming rate.
Let’s see how the new rules could change things for two Overall, while the system isn’t perfect for everyone, it’s
common situations: designed to give clear rules and treat similar cases alike.
Example 1: Single Retiree
• Has $80,000 in savings and investments. What Can Retirees Do? Practical Steps to Stay on
• Under the new rates, their first $64,200 is deemed at Track
0.75%, and the remaining $15,800 at 2.75%. With change comes opportunity. There are steps every
• The resulting deemed income is added to any other in- retiree—or soon-to-be retiree—can take to maximise Age
come for the pension means test. Pension and retirement income:
Example 2: Couple 1. Review Your Financial Assets
• Joint assets of $120,000. Catalogue all relevant accounts and investments. Online
• First $106,200 deemed at 0.75%, remaining $13,800 at calculators (such as from AMP, SuperGuide, and Services
2.75%. Australia) can help estimate new “deemed” income and
• Both are assessed on their share, and the couple’s com- potential pension amounts.
bined pension may be reduced if their income (real or 2. Update Your Details with Centrelink
deemed) is above the couple’s free area. Ensure all information is current—especially if you’ve re-

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