What the End of the Deeming Freeze Means for Age Pensioners…

If you receive the Age Pension, important changes coming into effect on 20 September 2025 may impact your payments.

What’s changing?

Deeming rates—used by the government to estimate the income pensioners earn from savings and investments—have been frozen since May 2020. That freeze is ending.

These rates play a key role in determining both eligibility for the Age Pension and the payment amounts, particularly for part-rate pensioners.

From 20 September 2025, new deeming rates will apply:

0.75% for financial assets up to $64,200 (singles) or $106,200 (couples, combined)
2.75% for assets above those thresholds

This represents a notable increase from the current rates of 0.25% (lower threshold) and 2.25% (upper threshold), which have remained unchanged for more than five years despite rising interest rates.

What does this mean for pensioners?

The deeming system assumes a standard rate of return on financial assets—regardless of actual earnings. This simplifies income assessment and creates a consistent approach across different investment types, including savings accounts, shares, ETFs, and managed funds.

While the change won’t affect everyone, pensioners with significant savings or investments may see their Age Pension reduced due to higher deemed income. The exact impact will depend on your financial circumstances.

The government estimates that the freeze saved social security recipients approximately $1.8 billion since 2020. However, in announcing the change, it emphasized a gradual return to more typical settings:

“As Australians begin to feel the positive impacts of inflation easing, the Government will now gradually return deeming rates to pre-pandemic settings—to reflect rates of return that pensioners and other payment recipients can reasonably access on their investments.”
– Government media release

Even with these increases, deeming rates will remain below pre-COVID averages.

Balancing the impact: Pension increase

To coincide with this change, regular indexation of government payments will also take place. From 20 September:

Single full-rate pensioners will receive an increase of $29.70 per fortnight
Couples (each) on the full pension will receive an extra $22.40 per fortnight

However, for those with higher financial assets, increased deemed income may offset some or all of this rise.

What else Is new?

Responsibility for recommending future deeming rates will shift from the Minister for Social Services to the Australian Government Actuary, aiming for a more data-driven approach.

What should you do?

If you currently receive the Age Pension, now is the time to review your financial position and understand how the changes may affect your payments.

For more details:

Visit the Services Australia website
See updated payment rates on the Department of Social Services website

Taking the time now to assess your situation will help you plan with confidence.

Rick Maggi CFP, Financial Advisor Perth, Westmount Financial