Deeming is a key part of the pension system. Deeming is used to work out an assumed income created from your financial assets. The main type of financial assets are:
Savings accounts and term deposits
Managed investments, loans and debentures
Listed shares and securities
Some income streams
Some gifts you make
Services Australia will include any deemed income in calculating pension payments. Deeming rules are in place to give retirees an incentive to invest savings to generate more retirement income.
What is a deeming account?
Deeming accounts are bank accounts for over 55s and pensioners. They should return interest in line with the government's set deeming rates, and this income is what is used to calculate pension payments.
The deeming rate is the expected rate of return from different financial investments based on the amount invested. If the financial investment pays more than the deeming rate, the extra income is not assessed by the government and pension payments stay the same. Deeming rules are in place to give retirees an incentive to invest savings to generate more retirement income.
Deeming rates change every couple of years. They are much lower now than in the past, reflecting the record low interest rates. A lower deeming rate means more money for pensioners.
What are the deeming rates?
There are 2 deeming rates. They depend on your specific circumstances.
For financial investments up to $53,600 in value for singles; up to $89,000 combined for couples with at least 1 pension; and up to $44,500 in value per person for couples with no pension.
0.25%
For financial investments above $53,600 in value for singles; above $89,000 combined for couples with at least 1 pension; and above $44,500 in value per person for couples with no pension.
2.25%
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Pensioner savings accounts are fee free, open to people 55 and over or receiving a government pension.
Who is eligible for a deeming account?
You can apply for a deeming account if you're over 55 and you're claiming a government pension. These accounts are investment products, there is no credit check. As well as meeting pension or age eligibility requirements, you’re also asked to provide identification such as your driver's licence and Medicare card.
Check the product's terms for a full list of application requirements before you open an account.
Be over the age of 55
Receive a government pension: age, disability, service or carers pension
Have an Australian residential address
What documentation or paperwork will I need before applying?
You can research, compare and apply for different deeming accounts online. As a new customer you can verify your identity online in most cases too. You may be asked to fax or email a copy of your ID and in some cases you may need to visit a branch to verify your identity with the account provider.
Current state or territory driver's licence or proof of age card
Medicare card
Tax file number
SMSF details if applicable
How to apply for a deeming account
Follow the links on this page to apply for one of the accounts in our comparison tables. You’ll be redirected to the account provider’s website where you’ll able to complete a secure online application in 10 minutes.
Once you’ve submitted your application for a deeming account, you’ll be contacted by the account provider on the email you provided about the next steps. You may need to provide further identification. Once your identity has been verified you’re free to make a deposit into the investment account.
Information you might find helpful
There are a wide number of financial investments that are assessed under the deeming rules. The main types include:
Monthly fees. Deeming bank accounts are made for retirees. They're mostly fee free. Some accounts give a number of free transactions such as ATM withdrawals every month. Other accounts waive transaction fees altogether. Fees may apply for telephone banking transactions, transactions at a branch and overseas transactions.
Interest rate. These accounts can have a tiered interest rate loosely linked to the government deeming rate.
Account access. Funds are available at call. You can withdraw money from this account in person or electronically whenever you wish.
Commissions or fees. Compare the commission and fee structures of different trading platforms. Some brokers can charge a little extra for specific trades.
Trading options. What options are on offer for different types of trade, for example placing and timeframe rules.
Tools and support. Educational resources and 24-hour customer service are key features.
Account fees vary according to the account type. Pensioner savings accounts and term deposits are generally fee free whereas share trading accounts can attract a commission.
This depends on the financial investment. You can expect savings accounts and term deposits to return around the lower deeming threshold. Term deposits for retirees can return an above deeming rate for some investment terms. Share trading can return well above the upper deeming threshold.
APRA has published a list of authorised deposit-taking institutions offering retirement savings accounts.
An income stream from a superannuation fund in the pension phase. You can apply for an income stream after you've retired to access your super money.
A payment from the Department of Social Services, for example the aged pension. This is not the same as your superannuation pension, which is your own money.
The aged pension is means tested. The government looks at your income and your assets to determine if you qualify for the aged pension or not.
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products.
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The deeming account is only available to people who are over 55 and are claiming a government pension. I’m afraid that having a concession card will not qualify you to open such an account. Nevertheless, you may consider seeing other bank accounts to compare your options. On the page, is a comparison table you can use to see which account suits you. When you are ready, you may then click on the “Go to Site” button to be redirected to the bank’s website where you can proceed with your application or get in touch with their representatives for further assistance.
When you file your income tax return at the end of each financial year, you need to declare all your sources of income including the interest earned on your savings account.
Thanks for your question. The asset value thresholds which are used to determine deeming rates, are adjusted annually on the 1st of July. Note however that the actual deeming rate may change periodically.
I am on age pension.I do share trading with some gains and losses.
1. am I required to report this to centrelink
2. how is this to be reported and when
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Can I open a deeming account as I don’t receive a pension but have a concession card
Hi,
Thanks for your inquiry.
The deeming account is only available to people who are over 55 and are claiming a government pension. I’m afraid that having a concession card will not qualify you to open such an account. Nevertheless, you may consider seeing other bank accounts to compare your options. On the page, is a comparison table you can use to see which account suits you. When you are ready, you may then click on the “Go to Site” button to be redirected to the bank’s website where you can proceed with your application or get in touch with their representatives for further assistance.
Hope this helps.
Cheers,
May
If i have a pensioner savings account does the ATO take a percentage of the interest that i earn yearly, if so why.
Hi Lynn,
Thanks for your question.
When you file your income tax return at the end of each financial year, you need to declare all your sources of income including the interest earned on your savings account.
Cheers,
Anndy
When will the deeming rates used by Centrelink for 2016 be reassessed?
Hi Wendy,
Thanks for your question. The asset value thresholds which are used to determine deeming rates, are adjusted annually on the 1st of July. Note however that the actual deeming rate may change periodically.
I hope this helps.
Clarizza
I am on age pension.I do share trading with some gains and losses.
1. am I required to report this to centrelink
2. how is this to be reported and when
Hi Ken,
Thanks for your question.
You are required to report to Centrelink if you receive income from those shares. This could include dividends.
You may refer to Services Australia’s employment income reporting for information on how and when to report your income. I’d recommend that you contact Centrelink directly to confirm if you need to report dividends.
Cheers,
Shirley