For now, the pension system still uses a shorthand method to work out how much retirees are likely to earn from their financial assets, from bank accounts to managed funds. This method, known as deeming, was loosened during the pandemic when emergency measures cut the assumed return sharply to protect pensioners and support spending while the economy was in lockdown. Those temporary settings stayed in place even as interest rates climbed, which meant many retirees kept benefiting from relatively low assessed income compared with actual market returns.
Under the latest change, the lower deeming rate for singles with financial assets below roughly $64,200 and couples with combined assets below about $106,200 will rise to 1.25%. Above those thresholds, the upper deeming rate will move to 3.25%. Taken together with an earlier increase six months ago, the deemed return is up by 1% since September and official estimates suggest the adjustment trims around $450 million a year from pension spending, or about $1.8 billion over four years. Government agencies frame the new settings as still relatively generous when compared with long‑term averages and the current Reserve Bank cash rate of 3.85% but they also acknowledge this is a clear step away from the emergency-era concessions.
In the bigger picture, the shift looks like part of a gradual reset of retirement policy as the economy moves further away from the COVID shock. Some retirees with modest investments may barely notice the impact because the changes land on 20 March, the same day that age pension, disability support and carer payments automatically rise with inflation, about $22 extra a fortnight on the current full single rate of roughly $1080 with flow‑ons to rent assistance, JobSeeker and parenting payments. However, for retirees with larger financial holdings the higher deeming rates seem likely to eat into future pension entitlements, even if only slowly. By outsourcing the deeming advice to the government actuary and emphasising that the assumed returns are still below typical savings account offers, the government appears to be signalling more incremental adjustments ahead rather than another long freeze on the rules.
