For many Australian retirees, pension payments are carefully planned down to the dollar. So when payments drop — even slightly — it can come as a shock.
That’s exactly what happened to 75-year-old retiree Margaret Collins in Newcastle. “My pension went down a bit, and I couldn’t figure out why,” she said. “Nothing in my life had changed — but my payment had.”
The reason lies in a quiet but significant factor: deeming rates and how they interact with your savings. While there hasn’t been a dramatic headline increase in rates, March 2026 changes and ongoing thresholds are now reducing payments for many pensioners.
For some, this “hidden cut” could mean losing hundreds — even over $1,500 a year.
Here’s what’s really happening.
What Are Deeming Rates?
Deeming rates are used by Centrelink to estimate how much income you earn from your financial assets — regardless of your actual earnings.
This means:
- Your savings, shares, and investments are assumed to earn a set rate of income
- This “deemed income” is used in the income test
- Your pension is reduced if deemed income exceeds certain thresholds
Even if your bank account earns very little interest, Centrelink still applies the deeming formula.
What Changed in March 2026
The key issue in 2026 is not a dramatic rate increase — but how existing deeming rules are now affecting more people.
Key developments include:
- No major upward adjustment to deeming thresholds
- Rising savings balances due to interest rates
- More pensioners crossing into higher deeming brackets
- Increased assessed income under the income test
In simple terms:
👉 Your financial situation may not have improved much — but Centrelink may treat it as if it has.
Current Deeming Rates (Guide)
| Asset Level | Deeming Rate |
|---|---|
| Lower threshold | ~0.25% |
| Above threshold | ~2.25% |
Thresholds differ for singles and couples, but once exceeded, the higher rate applies.
How This Reduces Your Pension
Here’s how the “hidden cut” happens:
- Your savings increase slightly (or remain steady)
- Centrelink calculates higher deemed income
- Your income test result increases
- Your pension payment is reduced
For many retirees, this results in:
- $30–$60 less per fortnight
- Up to $1,540 less per year
And because this happens gradually, it often goes unnoticed at first.
Real Stories Behind the Impact
Margaret Collins says the reduction caught her off guard.
“I didn’t earn more money,” she said. “But somehow, I was treated like I did.”
In Brisbane, 78-year-old John Peters noticed a similar change.
“My savings didn’t change much,” he explained. “But my pension went down anyway.”
These stories highlight a key issue: deemed income doesn’t always match real income.
Government Position
Government agencies maintain that deeming simplifies the system.
A Services Australia spokesperson said:
“Deeming provides a consistent way to assess income from financial assets, ensuring fairness across the system.”
Officials also note:
“Rates are set conservatively and reviewed periodically.”
However, many retirees feel the system doesn’t reflect real-world returns.
Expert Analysis and Insights
Financial experts say deeming is one of the most misunderstood parts of the pension system.
Key insights include:
- Over 2 million Australians are affected by deeming rules
- Many retirees keep savings in low-risk, low-return accounts
- Deeming can overestimate actual earnings
According to retirement adviser Michael Grant:
“Deeming is simple, but it’s not always accurate. It can disadvantage people who are earning less than the assumed rate.”
Experts also point out:
- Inflation and interest rate changes can amplify the effect
- Small increases in savings can trigger reductions
- Lack of awareness leads to confusion
Why This Feels Like a “Hidden Cut”
Unlike a direct policy change, deeming impacts are:
- Gradual
- Indirect
- Often unexplained
This creates the perception of a “hidden cut”, even though the rules themselves haven’t dramatically changed.
Income Test Impact
Your pension is reduced once your income exceeds certain limits.
| Income Level | Pension Outcome |
|---|---|
| Below threshold | Full pension |
| Above threshold | Reduced pension |
| High income | No pension |
Deemed income is included in this calculation.
What You Should Know
If you’re receiving a pension, take these steps:
- Check your deemed income in myGov
- Review your financial assets
- Understand how thresholds apply to you
- Monitor any changes in payments
- Seek financial advice if needed
It’s also important to:
- Avoid assuming your real income is what Centrelink uses
- Keep track of asset growth
- Plan ahead for potential reductions
How to Manage the Impact
While you can’t avoid deeming, you can manage its effects:
- Keep assets within thresholds where possible
- Consider spending on exempt items (e.g., home improvements)
- Review financial strategies regularly
- Avoid unnecessary accumulation of assessable assets
Always seek professional advice before making changes.
Questions and Answers
1. What are deeming rates?
Rates used to estimate income from your assets.
2. Did deeming rates increase in 2026?
Not significantly, but their impact has grown.
3. Why is my pension reduced?
Because Centrelink assumes you earn more income.
4. How much can I lose?
Up to around $1,540 per year.
5. Does actual income matter?
No, deemed income is used instead.
6. What assets are included?
Savings, shares, and investments.
7. Can I avoid deeming?
No, but you can manage your assets.
8. Are all pensioners affected?
Only those with financial assets.
9. How do I check my deemed income?
Through myGov or Centrelink.
10. Should I move my money?
Only with proper financial advice.
11. Why is this system used?
To simplify income assessment.
12. Does this affect couples?
Yes, with combined thresholds.
13. Will this change again?
Possibly, depending on policy updates.
14. What’s the biggest mistake?
Not understanding how deeming works.
15. What should I do now?
Review your assets and payment details.
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