Deeming rate changes from 20 September: will your pension be affected?

If you receive the Age Pension or another Australian social security payment, upcoming deeming rate changes from 20 September 2025 may affect your entitlement.

The government will increase deeming rates for the first time since 2020, ending a long‑standing freeze introduced during the COVID‑19 pandemic. While these changes sound concerning, many pensioners will not see their payments decrease—and some may still receive a net increase.

What Are Deeming Rates and How Do They Work?

Deeming rates help the government calculate your Age Pension and social security payments when you hold financial assets such as:

• Savings accounts
• Term deposits
• Shares
• Managed funds

Instead of assessing your actual investment returns, Services Australia applies deeming rates and assumes your financial assets earn a set level of income, regardless of what they actually earn. The government then uses this deemed income to assess your pension under the income test.

Current Deeming Rate Thresholds

Two deeming rates apply:

• A lower deeming rate applies to the first $64,200 of financial assets for singles and $106,200 for couples.
• A higher deeming rate applies to financial assets above these thresholds.

Deeming Rate Changes Effective 20 September 2025

From 20 September 2025, the government will increase both deeming rates by 0.5%:

• The lower deeming rate will rise from 0.25% to 0.75%
• The upper deeming rate will rise from 2.25% to 2.75%

These increases mark the end of a freeze that began in May 2020, when the government reduced deeming rates as an emergency COVID‑19 measure.

Who Will the Deeming Rate Changes Affect?

Not everyone who receives the Age Pension or social security will feel the impact. The deeming rate increase will only affect you if:

• You receive a pension assessed under the income test, and
• Your assessable income exceeds the income‑free area for your payment type

If Services Australia assesses your pension under the assets test, the deeming rate changes will not affect your payment.

Pension Indexation May Offset Deeming Rate Increases

Here’s the good news: the deeming rate changes coincide with regular pension indexation on 20 September. Indexation increases pension rates to reflect changes in the cost of living.

For many pensioners, the indexation increase will fully offset—or exceed—the impact of higher deeming rates. As a result, most affected recipients will not see a reduction in their fortnightly payments.

For example, a single Age Pension recipient with $200,000 in financial assets and no other income will still receive the full $29.70 per fortnight indexation increase, as the deeming rate change does not affect their payment at that asset level.

What Should You Do Next?

If you’re unsure how the 2025 deeming rate changes may affect your pension, contact Services Australia or speak with your financial adviser for personalised guidance.

Remember, if your investments earn more than the deeming rates, Services Australia does not count the excess return as income for pension purposes. This system encourages pensioners to seek reasonable investment returns without penalising them under the income test.