For many Australian retirees, pension payments are expected to remain steady unless their personal circumstances change. But in 2026, thousands are discovering that their income can shrink — even when nothing in their day-to-day life looks different.
That’s what happened to 77-year-old Sydney pensioner Robert Hayes. “My savings didn’t change much,” he said. “But suddenly, my pension dropped. I couldn’t understand why.”
The answer lies in one of the most misunderstood parts of the system: deeming rates.
From March 20, 2026, changes in how deeming thresholds and asset levels interact are creating what many are calling a “deeming rate bombshell” — with some retirees losing up to $1,540 per year from their pension.
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.
Instead of calculating your actual earnings, the system assumes your assets earn a fixed rate of return.
This includes:
- Savings accounts
- Term deposits
- Shares and managed investments
Even if your real returns are lower, Centrelink still uses the deemed rate.
Current Deeming Rates (2026)
| Asset Level | Deeming Rate |
|---|---|
| Below threshold | ~0.25% |
| Above threshold | ~2.25% |
Thresholds differ for singles and couples, but once exceeded, the higher rate applies.
What Changed From March 20, 2026
The “bombshell” is not a dramatic increase in rates — but a shift in how more pensioners are being affected.
Key developments include:
- More retirees holding higher savings balances
- No significant increase in deeming thresholds
- More assets falling into the higher deeming bracket
- Increased “deemed income” under the income test
This means:
👉 Even small increases in savings can push you into a higher assessment level.
How You Could Lose $1,540 Per Year
Here’s how the reduction happens:
- Your savings exceed the lower threshold
- A larger portion of your assets is deemed at the higher rate
- Your assessed income increases
- Your pension payment is reduced
For many retirees, this results in:
- Around $30–$60 less per fortnight
- Up to $1,540 less annually
And it often happens without clear warning.
Real Stories Behind the Impact
Robert Hayes says the change felt unfair.
“I didn’t earn more money,” he said. “But they treated me like I did.”
In Adelaide, 79-year-old Helen Carter noticed a similar drop.
“My bank interest is low,” she explained. “But Centrelink assumes I’m earning more than I actually am.”
These stories highlight a key issue: deemed income doesn’t reflect real income for many retirees.
Government Position
Government agencies defend deeming as a fair and simple system.
A spokesperson said:
“Deeming provides a consistent method to assess income from financial assets and ensures fairness across recipients.”
Officials also note:
“Rates are set conservatively and reviewed regularly.”
However, many pensioners feel the system is outdated.
Expert Analysis and Insights
Financial experts say deeming is increasingly out of step with reality.
Key insights include:
- Over 2 million Australians are affected by deeming rules
- Many retirees earn less than the assumed rates
- Small asset increases can trigger disproportionate pension reductions
According to retirement adviser David Lang:
“Deeming simplifies the system, but it can penalise conservative savers.”
Experts also point out:
- Inflation is pushing savings balances higher
- Interest rates do not always match deeming assumptions
- Awareness of the rules is low
Why This Feels Like a “Hidden Cut”
Unlike a direct policy change, deeming impacts are:
- Gradual
- Indirect
- Difficult to understand
This creates the perception of a hidden pension cut, even though the rules themselves haven’t dramatically changed.
Income Test Impact
Your pension is reduced once your assessed income exceeds certain thresholds.
| 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 Do Now
If you’re receiving the Age Pension:
- Check your deemed income via myGov
- Review your total financial assets
- Understand how thresholds apply to you
- Monitor any changes in payments
- Seek financial advice if necessary
It’s also important to:
- Avoid assuming your actual income is used
- Track how savings affect your pension
- Stay informed about future updates
How to Manage the Impact
While you can’t avoid deeming, you can plan around it:
- Keep assets within thresholds where possible
- Consider spending on exempt assets (e.g., home improvements)
- Review investment strategies
- Plan withdrawals carefully
Always consult a professional before making financial changes.
Common Mistakes to Avoid
Many pensioners face unnecessary reductions due to:
- Not understanding deeming rules
- Ignoring small asset increases
- Failing to review their financial position
- Assuming payments will remain unchanged
Questions and Answers
1. What are deeming rates?
Rates used to estimate income from your assets.
2. Did rates increase in 2026?
Not significantly, but their impact has grown.
3. Why is my pension reduced?
Because your deemed income has increased.
4. How much can I lose?
Up to about $1,540 per year.
5. Does actual income matter?
No, deemed income is used.
6. What assets are included?
Savings, shares, and investments.
7. Can I avoid deeming?
No.
8. Are all pensioners affected?
Only those with financial assets.
9. How do I check my status?
Through myGov or Centrelink.
10. Should I move my money?
Only with professional advice.
11. Why is this system used?
To simplify assessments.
12. Does this affect couples?
Yes.
13. Will this change again?
Possibly.
14. What’s the biggest mistake?
Not understanding the rules.
15. What should I do now?
Review your assets and payment details.
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