The government is blocking attempts by interest groups to uncover how pension deeming rates are determined, as criticism of current deeming levels reaches fever pitch.
A national body representing pensioners and retirees revealed the government had quashed two Freedom of Information requests about the income test that sets the controversial rates.
Combined Pensioners and Superannuants Association policy co-ordinator Paul Versteege told The New Daily the organisation has asked for a third review, which is now in the hands of the Transparency Commissioner.
The association is concerned the deeming rate, which ascribes a rate of return to financial investments above the pension assets test limit to determine the income of part-pensioners, has moved out of kilter with interest rates.
“If you look at it 10 years ago it was quite generous,” Mr Versteege said.
“The term deposit rate was 5.3 per cent and deeming rates were 2 per cent and 3 per cent.”
Today, deeming rates sit at 1.75 per cent for invested amounts of up to $51,800 for singles and $86,200 for couples.
Over that amount up to asset test limits assets are deemed to earn 3.25 per cent.
Term deposit rates are about 2 per cent and the savings accounts used by people with lower savings levels are a miserly 0.3 per cent.
That means that 10 years ago people were earning between 2 per cent and 3 per cent more on their savings that the government ascribed to them. That gave part-pensioners extra income that did not reduce their pension levels.
Now the reverse is true and pensioners’ savings are deemed to earn more than they actually deliver, which reduces their pension payments without delivering the extra income the deeming rate assumes.
“It’s inequitable and deeming rates should be reassessed,” Mr Versteege said.
“Deeming should be part of the retirement incomes review that [Treasurer] Josh Frydenberg announced.
“We say deeming rates should be lowered to around 1 per cent and 2.3 per cent, which would get the effect closer to where they were 10 years ago.”
Those differences in deeming rates over 10 years have a significant effect on the income of part pensioners, research from the association showed. Current deeming rates result in maximum income reductions of $1627.31 for singles and $1760.13 for couples.
In 2009 the interaction of the deeming rate and term deposit rates meant part-pensions for singles were reduced by $614 a year while for couples it was $213.50.
Deeming rates are currently set by ministerial discretion.
Ian Yates, CEO of lobby group Council of The Ageing, said this needed to change.
“The lower deeming rate should be set against a basket of cash and term deposit rates,” Mr Yates said.
Setting the higher deeming rate was more complex because at those levels assets held included shares and other investments where returns were not determined by interest rates.
“If you look at superannuation returns, they have been around 7 per cent,” Mr Yates said.
The government’s retirement incomes review needed to look at how best to set the higher deeming rate, he said.
Labor’s Families and Social Services spokeswoman Linda Burney said: “We are calling on the government to lower the deeming rate and make it clear how the rate is set.”
Mr Frydenberg said the government was looking “closely” at the level of deeming rates.
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