While discussion was focused on the federal government’s economic reform roundtable last week, a significant change that will mainly affect age pensioners flew under the radar.

For the first time in five years, the government will adjust the rates it assumes pensioners earn from their savings and investments, which for many will mean a change their social security payments.

The rates have been fixed since May 2020, when they were reduced in line with the record low interest rates set during the COVID pandemic.

Although official interest rates were increased 13 times since 2022 – which lifted the interest rates that pensioners could actually achieve on term deposits as high as 4% or 5% – pensioners were assumed or “deemed” to be only earning 0.25% interest on savings below a threshold (currently $64,200 for single pensioners), or 2.25% interest above that threshold.

For the government, the one-size-fits-all “deeming rates” simplify the way it calculates pensions and other income support payments. The rates also simplify reporting for pensioners who do not need to declare the actual income earned on their investments.

So, what’s changing?

Since 2020, the widening gap between the actual income many pensioners earn on their savings and the income the government assumed them........

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