What are deeming rates?
What are deeming rates?
And how 2025 changes could affect your retirement plans.
With deeming rates on the rise in Australia for the first time in five years, now’s a good time to understand what they are and how they could impact your future retirement.
Deeming rates are changing in 2025
On 20 August 2025, Federal Social Services minister Tanya Plibersek announced changes to deeming rates. Not sure what they are or why they matter? Don’t worry, we’re here to break it down in a simple way without the jargon, so you can stay ahead and make smarter moves for retirement (even if it still feels like a long way off).
Deeming rates explained simply
When it comes to figuring out how much Age Pension you’ll get, rather than dig through every bank account or investment everyone has (timely and costly!), the Government use what’s called a deeming rate. It’s a standard interest rate used to estimate how much income your assets could be earning, rather than what you’re actually earning. That estimated income helps determine how much Age Pension support you’ll get to retire with.
Why do we use deeming rates?
Deeming rates are used to keep things fair, treating all financial assets the same, no matter where or how your money’s invested. That means:
- If you’re getting high interest on your investments: you aren’t penalised for being savvy.
- If your returns are lower: you don’t get an unfair advantage.
From September 20, 2025, the Age Pension deeming rates increased to 0.75% for the first $64,200 (singles) or $106,200 (couples) in financial assets, and 2.75% on any assets above these thresholds. This change follows the end of a five-year freeze, replacing the previous rates of 0.25% and 2.25%. The new, higher rates are used to calculate the “deemed income” from your financial investments for the Age Pension income test.
Why are deeming rates going up?
Deeming rates have been frozen for the last few years to protect pensioners during the economic uncertainty caused by the pandemic. Now, with interest rates and markets stabilising, the Government is adjusting deeming rates to better align with interest rates.
Why should I care about deeming rates?
It may not exactly seem like a thrilling topic, but deeming rates can have an impact on your future income and affect your pension. With the changes rolled out from 20 September, it’s worth understanding, especially if they could affect your overall retirement plan (or inspire you to start one!).
Here’s why it matters
When deeming rates go up: the Government assumes you’re earning more from your assets (even if you’re not) and may result in a lower Age Pension.
Increasing the Age Pension: Alongside the deeming rate increase, the Government is also raising Age Pension payments to help with the cost of living. Singles on a full Age Pension will see an increase of $30 a fortnight and couples on a full Age Pension will see an increase of $22.40 each per fortnight.