Pensioners may be worse off despite rise

Pensioners will still get more money later this month despite a rise in the pension
deeming rate, the federal government says.
Families and Community Services Minister Jenny Macklin said the new pension deeming
rate would still be lower than when the Labor government came to office.
"When the Budget pension rise and indexation are taken into account, single
pensioners on the maximum rate are up to $100 a fortnight better off than they were
in August last year," she said in a statement on Saturday.
Pension increases come into effect on March 20, with a single person on the top rate
receiving an extra $29.20, taking it up to $701.10 a fortnight, and a couple on the
top rate receiving an extra $44, taking their pension to $1057 a fortnight.
But the government has also lifted the deeming rate, again with effect from March
20. That's the nominal interest rate used to calculate earnings on pensioners'
investments under the income test.
The lower deeming rate will increase from two to three per cent for investments up
to $42,000 for single pensioners or $70,000 for a couple.
The rate will increase from three per cent to 4.5 cent for balances over these
amounts. These rates apply, even if the actual return is much higher.
The Weekend Australian newspaper on Saturday reported that pensioner advocates were
warning that many of the 700,000 part-rate pensioners would be worse off.
That was because they would be caught between the cut in the pensions and the
failure of banks to pass on rising interest rates for cash deposits, it said.
Ms Macklin said pensioners, like all Australians, understood rates of return moved
up and down, and the bank term deposit interest rate now stood at around six per
cent.
Prime Minister Kevin Rudd said the government was implementing the single biggest
increase in the aged pension in the scheme's 100-year history.
"We are proud of that fact that we're able to increase the single aged pension by
such a large amount in last year's budget," he told reporters.
But Opposition Leader Tony Abbott said pensioners would feel ripped off as the
government was giving with one hand and taking with the other.
He said the problem was that government policies were putting artificial upwards
pressure on interest rates.
"If the Rudd government wasn't engaged in this spending spree, we wouldn't have the
impact on interest rates and we wouldn't have pensioners having a pension increase
on the one hand and a pension cut on the other hand," he said.