Credit crunch prompts deeming rate drop

The federal government is set to lower the social security income test deeming rates as a result of the global financial crisis.
The deeming rate will change from four to three per cent for the first $41,000 of a single pensioner's financial investments and the first $68,200 for couples.

It will shift from six to five per cent for the balance of financial investments. "This is to reflect the recent reduction in interest rates and the impact the global financial crisis is having on returns on pensioners' investments," Community Services Minister Jenny Macklin said in a statement. "The Rudd government's decision acknowledges that many pensioners and social security recipients who also rely on own-source income have been adversely affected by the global financial crisis."

Deeming rates are used to assess income from financial investments for social security pensions and allowance purposes. They assume that financial investments are earning a certain rate of income.
Payments affected by the deeming rules include means tested pensions, such as the age pension, the disability support pension and carer payment, along with income support allowances and supplements such as the parenting payment and Newstart, Ms Macklin said.

The changes will come into effect from November 17.
Last week, the government announced Centrelink had updated the value of pensioners'
listed securities and managed investments in the wake of the financial crisis.