February 24: Centrelink Deeming Rate Hike May Erase Many Part Pensions
A centrelink deeming rate increase from 20 March is set to tighten the Age Pension income test in Australia. After years of COVID relief, higher assumed returns on financial assets mean assessed income will rise. That can reduce or cancel a Centrelink part pension for retirees with bank savings, term deposits, managed funds, and account‑based pensions. We explain how age pension deeming rates work, who is most exposed, likely portfolio impacts, and practical steps to protect cash flow before the change lands.
What changes on 20 March and why it matters
Deeming applies a standard return to financial assets, regardless of what you actually earn. Centrelink uses that figure to assess income for the Age Pension. When deemed returns rise, more of your financial assets count as income. For part‑pensioners near the cut‑off, a centrelink deeming rate increase can tip them over, lowering fortnightly payments or removing eligibility under the income test.
During the pandemic, rates were reduced and then held to cushion retirees. The government is now lifting deeming to reflect higher market interest rates, reversing temporary relief. Media reports flag that many part pensions could disappear as a result. See coverage in the AFR and The West for context: AFR, The West.
Who is most at risk of losing a part pension
Singles or couples with meaningful cash savings, term deposits, or large account‑based pensions are most exposed. Those who only recently qualified for a Centrelink part pension may sit close to the income cut‑off. A centrelink deeming rate increase lifts assessed income, shrinking payments. Rent assistance and other add‑ons can also fall if the base pension moves lower under the income test.
Deeming is a set assumption. If your portfolio earns less than the deeming rate, Centrelink still counts the higher deemed income. If markets fall or dividends are cut, that gap can strain budgets. Retirees relying on interest and distributions may face lower cash receipts while the income test rises, a double hit for household cash flow.
How to check your payment under higher deeming
List all financial assets: bank accounts, bonus savers, term deposits, managed funds, shares, and super pensions in drawdown. Apply the new deeming factors once published and total the deemed income. Compare that to your last Centrelink letter and note the income‑test free area and taper rules you were assessed under. If the gap widens, your Centrelink part pension is likely to fall from 20 March.
Update balances to the most recent statements so your record is current. Ensure account‑based pension details, drawdowns, and any recent redemptions are correct. Check whether you reported changes in circumstances, such as asset sales or gifts. Keeping data accurate reduces the risk of overpayments or surprise debts if the centrelink deeming rate increase pushes you past the limit.
Portfolio and cash flow moves to consider
Review cash and fixed income options. Higher bank rates may allow shorter terms with similar yields, improving liquidity. Ladder term deposits to spread reinvestment risk. Consider the trade‑off between bonus savers and fixed terms. Keep an emergency buffer so you do not sell growth assets at a weak time if payments drop under higher age pension deeming rates.
Franked dividends can lift taxable income and interact with the income test. Review the mix between franked shares, cash, and bond funds. For account‑based pensions, confirm beneficiary settings and minimum drawdowns. Annuities and pooled products have different assessment rules. Seek licensed advice before product changes, especially if the retiree investment income test is the binding limit.
Final Thoughts
The key message is simple. A centrelink deeming rate increase from 20 March will lift assessed income for many retirees. Those near the income cut‑off face the highest risk of a reduced or cancelled Centrelink part pension. Act now: gather current balances, recalc deemed income when the factors are published, and compare to your last Centrelink assessment. Tighten cash flow by trimming discretionary spend, laddering deposits, and keeping a cash buffer. Review tax, franking, and product structures with a licensed adviser to avoid unintended impacts. Staying proactive can soften the hit and keep your retirement plan on track.
FAQs
When does the deeming change start to affect payments?
The change takes effect from 20 March. Centrelink reassesses payments based on updated deemed income, so reductions can appear from that date or shortly after. Check your myGov inbox and recent letters for updated calculations, and confirm your financial asset balances are current to avoid errors.
Why could a Centrelink part pension be wiped out?
Higher deeming lifts assessed income from bank accounts, term deposits, managed funds, and super pensions. If that assessed income pushes you over the income cut‑off, your payment stops. Some retirees close to the limit will be most at risk, even if their actual investment returns are lower than the deeming rate.
How can I estimate the impact on my Age Pension?
List all financial assets and apply the new deeming factors when published. Compare the resulting deemed income to figures on your latest Centrelink assessment. If the deemed amount is higher than before, your payment likely falls. Keep balances updated and seek licensed financial advice for complex situations.
What portfolio moves should retirees consider now?
Start with cash and fixed income. Ladder term deposits for liquidity, compare bonus savers, and keep a cash buffer. Review exposure to franked dividends and bond fund distributions, since they affect tax and assessed income. Avoid rushed product switches without advice, as different products can be assessed in different ways.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.