Age pension has not kept up with inflation
New figures have suggested that age pension rules are failing to keep pace with falling interesting rates, and in turn leading to a financial hit for many senior Australians.
This issue is stemming from the effect on inflation and the current pension deeming rate, which is used to assess an individual’s income from cash and other investments. A higher deemed income can result in an individual being entitled to lower pension payments.
The problem is that despite three official dips in interest rates from the Reserve Bank of Australia since May last year (totalling 0.75 per cent) the pension deeming rate hasn’t moved. Lower interest rates mean less income from savings. As a result, many seniors are being judged to earn more than they actually receive, and are being slugged for it.
Ian Yates, CEO of seniors group COTA Australia, told News.com.au, “If people can’t get the deeming rate, they actually lose income because they government assumes they have got it. If you earn more than the rate, it’s free money. We have flagged to the government that they should be looking at it.”
“Sometimes it’s the part pensioners who are proportionally more affected because they are less likely to be using shares and more likely to have tens of thousands rather than hundreds of thousands of dollars. That makes people more susceptible to get rich quick schemes.”
But a spokesperson from the Department of Social Services was quick to note that deeming rates were related to a variety of investments and not just savings accounts that were particularly susceptible to moves by the Reserve Bank.
The spokesperson said, “The official cash rate is only one of a number of factors that are considered when setting the deeming rates. The Australian Government monitors the deeming rates on an ongoing basis. If required, changes to the deeming rates are usually made either in March or September, in conjunction with pension indexation.”
What do you think about the age pension? Should the government adjust deeming rates?
Let us know in the comments.
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