The Australian Federal Budget has announced a $450 million measure to freeze deeming rates, affecting approximately 460,000 age pensioners. This ensures the current rates remain unchanged for another year. For some, this may provide stability, but for others, it might raise questions about whether more should have been done. What does financial security look like for you in today’s economy?
Deeming rates represent the assumed rates of return on financial assets as determined by the government, regardless of the actual earnings. Any income earned above the deemed rate is not factored into the calculation of government payments. These rates apply to financial assets such as shares, superannuation, and bank accounts. Given how financial situations differ from person to person, do these assumptions reflect reality for you? Or do they feel out of step with your experience?
The current deeming rates have been set at 0.25 per cent for the lower threshold and 2.25 per cent for the upper threshold since May 2020. In a typical scenario, these rates would follow the Reserve Bank of Australia’s cash rate, which currently stands at 4.10 per cent. The government confirmed that the rates will remain unchanged in the 2025 Federal Budget to support older Australians amid the rising cost of living. Does this decision provide the certainty you need, or do you feel there are still gaps that need to be addressed?
This freeze applies to all individuals receiving Centrelink payments, but it’s particularly impactful for the 460,000 age pensioners whose payments are directly affected by deeming. The freeze was initially implemented by the former Coalition government in 2022 as a cost-of-living measure and has since been extended by the Labor government until July 1, 2025. For those impacted, how does this decision shape your financial outlook for the next year? Is it enough to feel secure, or are there concerns that remain?
While the deeming rates were not explicitly mentioned in the Budget papers, a Department of Social Services representative confirmed that they will remain frozen for another year. The decision to maintain the freeze comes at a cost to the budget, with the government estimating that a 1 percentage point increase in deeming rates could save around $1.8 billion over four years, equating to approximately $450 million annually.
For individual pensioners, the first $62,600 of financial assets is subject to the lower deeming rate of 0.25 per cent, while any amount over this threshold is deemed to earn 2.25 per cent. For couples where at least one partner is receiving a pension, the first $103,800 of combined financial assets is deemed at the lower rate, with the remainder at the higher rate. These thresholds are indexed annually on July 1 to reflect changes in the cost of living. You can find more information on deeming rates and their impact on your pension here.
But that’s not all the budget has in store for pensioners. The Labor government has also pledged to reduce the price of PBS-listed medicines to no more than $25 per prescription, should they be re-elected. This would mean a reduction in the cost of four out of five PBS medicines and a cut in maximum costs by more than 20 per cent starting from January 1, 2026. Additionally, pensioners and concession cardholders will benefit from a freeze on medicine costs at $7.70 until 2030. Beyond deeming rates, what other financial challenges are top of mind for you? Do these additional measures help ease some of the burden, or is there something else you were hoping to see addressed?
As the government moves forward with this budget measure, its impact on pensioners and their financial planning will likely vary from person to person. While the freeze on deeming rates provides continuity, perspectives may differ on whether it offers sufficient support in the face of rising living costs. When you reflect on these changes, what stands out to you? Is this a step in the right direction, or do you feel it misses the mark?
Does this measure provide the relief you need, or does it feel like just a small step? How do you see this impacting your financial future? In your experience, has the government improved in supporting older Australians, or do you feel there’s still a long way to go? If this isn’t enough, what changes would have made a bigger difference for you? We’d love to hear your thoughts—share your perspective in the comments below.
Also read: The Centrelink workaround that could shield age pensions from cuts
