When 73-year-old Margaret Collins opened her latest pension statement, she noticed her payment had fallen slightly — even though her bank balance hadn’t changed much. The reason? Updated deeming rates applied to her financial assets.
In 2026, new deeming rate settings are reshaping how Centrelink calculates income from savings and investments. For some retirees, the changes could mean reduced Age Pension payments — even without earning higher real returns.
With inflation easing but interest rates fluctuating, deeming rules are once again in focus.
Here’s how the updated asset rules could affect your pension this year.
What Are Deeming Rates?
Deeming rates are used by Centrelink to estimate income from financial assets.
Instead of calculating actual interest or dividends earned, the government applies a set percentage to assets such as:
- Bank savings accounts
- Term deposits
- Shares
- Managed funds
- Account-based superannuation (for those over pension age)
This calculated “deemed income” is then assessed under the Age Pension income test.
If deemed income increases, pension payments may decrease.
A fictionalised Services Australia spokesperson explained, “Deeming ensures a consistent and fair method of assessing income from financial investments.”
What Changed in 2026?
In 2026:
- Deeming rates have been updated in response to economic conditions.
- Thresholds for lower and upper deeming bands have been reviewed.
- Pension calculations now reflect these revised rates.
If deeming rates rise, retirees are assumed to earn more from their assets — even if their actual bank interest is lower.
That assumed increase can reduce pension entitlements.
How Deeming Bands Work
Deeming typically applies in two tiers:
- A lower rate applied up to a certain asset threshold.
- A higher rate applied to assets above that threshold.
For example (simplified illustration):
| Asset Amount | Deeming Rate Applied |
|---|---|
| First portion of financial assets | Lower rate |
| Above that portion | Higher rate |
If the higher rate increases, retirees with moderate savings may see noticeable changes.
Who Is Most Affected?
The updated deeming rates particularly impact:
- Part Age Pension recipients.
- Retirees with moderate savings.
- Couples with combined financial assets near income test limits.
- Seniors drawing from account-based super funds.
Margaret says, “I didn’t earn more from my bank account, but my pension still dropped.”
This reflects the core feature of deeming: it does not rely on actual earnings.
Why the Government Adjusts Deeming Rates
Deeming rates are influenced by:
- Official cash rate movements.
- Market interest rates.
- Broader economic trends.
When interest rates rise nationally, governments may adjust deeming rates upward to reflect higher expected returns.
Economist (fictionalised) Dr. Simon Hart notes, “Deeming is designed to mirror typical market returns, not individual performance.”
However, when actual returns lag behind deeming assumptions, retirees may feel penalised.
Comparison: Before vs After Deeming Update
| Scenario | Before 2026 | After 2026 Update |
|---|---|---|
| Savings assessed | Lower deemed income | Higher deemed income |
| Income test result | Higher pension | Possible reduction |
| Asset thresholds | Indexed | Slight adjustments |
| Full pension recipients | Less affected | Mostly unchanged unless near threshold |
Full-rate pensioners with very low financial assets are generally unaffected.
Part-rate pensioners are most exposed to changes.
Real Stories Behind the Numbers
John and Patricia, both 74, hold about $350,000 in combined savings and super income streams.
“We’re not wealthy, but we’re careful,” Patricia said. “When deeming changed, our part pension reduced. It was frustrating.”
Meanwhile, single retiree Alan, with limited savings, saw no impact.
“I’m on the full pension. My payment stayed the same apart from indexation.”
These examples show how financial positioning shapes outcomes.
Could Payments Increase Instead?
Yes — in certain circumstances:
- If asset thresholds rise with indexation.
- If actual income falls and asset balances decline.
- If a retiree qualifies for a full pension after adjustments.
Deeming works alongside income and asset tests, meaning changes don’t automatically result in cuts.
Asset Test Still Applies
In addition to deeming under the income test, the assets test also determines pension rates.
Assets include:
- Financial investments.
- Superannuation (post-pension age).
- Investment properties.
- Vehicles (excluding primary residence).
If asset limits increase in 2026, some retirees may offset income test reductions.
The primary residence remains exempt from assessment.
What You Should Do Now
If you are concerned about deeming changes:
- Review your financial asset balances.
- Log into your Centrelink account to view deemed income calculations.
- Confirm account-based super details are accurate.
- Consider speaking with a financial adviser.
- Ensure you’re not holding multiple super accounts unnecessarily.
Understanding how Centrelink applies deeming to your specific asset mix is key.
Can You Challenge a Deeming Decision?
Generally:
- Deeming rates apply universally.
- Individual appeals about actual earnings rarely override deeming.
- However, administrative errors can be corrected.
If you believe your asset figures are incorrect, request a review promptly.
The Bigger Retirement Picture
With superannuation contributions now at 12% and interest rates stabilising, retirement planning in 2026 is increasingly complex.
Deeming updates highlight a broader truth:
Retirement income is dynamic.
Policy analyst (fictionalised) Claire Donnelly says, “Small percentage changes in deeming can shift hundreds of dollars annually. Staying informed is essential.”
Q&A: Deeming Rates 2026
1. What are deeming rates?
Government-set rates used to estimate income from financial assets.
2. Did deeming rates increase in 2026?
Yes, updated rates now apply.
3. Will everyone lose pension money?
No, mostly part pensioners with moderate assets.
4. Does my home count?
No, your primary residence is exempt.
5. Does super count?
Yes, if you’re over pension age and drawing from it.
6. What if my bank interest is lower than the deeming rate?
Deeming still applies.
7. Can I avoid deeming?
No, it’s a standard calculation method.
8. Can payments increase instead?
Yes, depending on thresholds and assets.
9. How often are deeming rates reviewed?
Periodically, based on economic conditions.
10. Do couples have different thresholds?
Yes, combined assets are assessed.
11. What if I have no financial assets?
Deeming would not apply.
12. Does this affect Disability Support Pension?
Similar income test rules apply.
13. Should I reduce savings to increase pension?
Financial decisions should be made carefully with advice.
14. Can incorrect asset values cause issues?
Yes, ensure figures are accurate.
15. Why is 2026 significant?
Economic shifts have prompted rate adjustments affecting pension calculations.
For many retirees, deeming feels invisible — until payments change.
In 2026, updated asset rules may lead to reduced pensions for some, particularly those hovering near income test thresholds.
Understanding how your savings are assessed — and planning accordingly — could make all the difference in maintaining financial stability.
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