John Smith wrote on Oct 30
th, 2015 at 9:01am:
I had a neighbor come in all pissed off yesterday after having dealt wit centrelink all day, trying to find out why they were docking his pension. .... after two visits to the local centrelink office, having security called on him for daring to call them idiots, and multiple phone calls, they worked out they were docking his pension because they ASSUMED he was earning so much in interest on some money he had in a bank account ... when he told them the account earned 0.1% interest and not the 6% they were assuming, they told him that it wasn't their problem.
This is called "deeming" and it is a crock. It is one of the few interest rates in Australia that is not set by the RBA or the market. It is set by a Minister in the government (Minister for Social Services, not the Treasurer or Minister for Finance) and it is pure fiction.
The deeming rate currently has a maximum interest rate of 3.25%. This is higher than the highest market rate with the major banks, which is about 3%.
It is also interesting that
the DHS page on deeming explains what happens if the actual interest rate is higher (the pensioner keeps the extra income) but does not explain what happens if the actual interest rate is lower (which it is likely to be currently): money is taken from pensioners. Because the deeming rate is higher than the market rate, pensioners all around the country are being robbed.
Deeming is one reason why we should consider abolishing the means test for the aged pension (so everybody over the retirement age can access it) and pay for it by abolishing tax concessions for retirees. Deeming would go. It greatly simplifies the tax and pension system and provides better balance. This simpler system would also be less costly to administer.