Deeming rates rise again: what it means for the Age Pension

On 20 September 2026 the two deeming rates used in the Age Pension income test rose by 0.5 percentage points, to 1.75 per cent and 3.75 per cent. It was the third increase in twelve months, as the Government gradually resets rates that were held at record lows from 2020 to mid 2025. On the same day, pensions rose with indexation.

Deeming rates have risen three times in a year

Deeming rates were cut to 0.25 and 2.25 per cent on 1 May 2020 as an emergency COVID-19 measure, according to the Department of Social Services, and then frozen until 30 June 2025. Since then they have risen by half a percentage point at a time: to 0.75 and 2.75 per cent on 20 September 2025, to 1.25 and 3.25 per cent on 20 March 2026, and to 1.75 and 3.75 per cent on 20 September 2026.

The rates are now reviewed twice a year by the Australian Government Actuary, which advises the Minister for Social Services. Changes can take effect on 20 March and 20 September, in step with pension indexation. The Minister accepted the Actuary's latest recommendation, released on 20 August 2026.

The same announcement set the maximum pension from 20 September at $1,237.70 a fortnight for a single person, up $36.80, and $1,866.00 for a couple combined, up $55.60.

Deeming assumes an income from your financial assets

Deeming is how Centrelink works out income from financial assets for the income test. It assumes your savings and investments earn a set rate, whatever they actually earn. Financial assets include bank accounts, term deposits, shares and managed funds, and, once you reach Age Pension age, money held in super.

Two rates apply. The lower rate, now 1.75 per cent, applies to financial assets up to a threshold of $66,800 for a single person and $110,600 for a pensioner couple combined. The upper rate, now 3.75 per cent, applies to everything above the threshold. The thresholds are indexed each 1 July.

The Actuary sets the lower rate with reference to bank deposits, leaving out bonus interest. In its July 2026 letter it noted at-call savings at the major banks paying 1.25 to 2.10 per cent on 1 July 2026, before bonus interest, and one year term deposits paying 5.08 per cent. The upper rate reflects a spread across asset classes, with shares assumed to pay the average dividend of the All Ordinaries index, 4.6 per cent including franking credits, and capital gains left out.

Higher deeming rates can reduce some part pensions

As an illustration only, take a single pensioner with $100,000 in financial assets. At the new rates, the first $66,800 is deemed to earn $1,169 a year and the remaining $33,200 a further $1,245, a total of $2,414. At the rates that applied from March, the same assets were deemed to earn $1,914. Assessed income has risen by $500 a year.

A single person can have income of up to $226 a fortnight from 1 July 2026 and still receive the full pension. Above that, the pension reduces by 50 cents for each extra dollar of assessed income. For a single pensioner already above that limit, $500 more deemed income could mean about $250 a year less pension, before the indexation increase is counted.

For many people, the indexation rise will be larger than any reduction from deeming. National Seniors Australia said most pensioners should still see a modest rise, while some may see their payment fall. People whose pension is already the full rate, or who have few financial assets, may notice no effect from deeming at all.

Earning more than the deeming rate does not reduce the pension

Because deeming uses an assumed income, any actual return above the deeming rates is not counted. The Department of Social Services describes this as supporting self-provision and leaving people free to choose investments on their merits. A return below the deeming rates does not lower assessed income either.

The Actuary's letter shows that the single pensioner with $100,000 would need a return of 2.41 per cent across all financial assets to match the new deeming rates. With $222,500, close to the average for part pensioners under the income test, the figure is about 3.1 per cent. In its January 2026 letter, the Actuary said current earning rates are "not necessarily an indication of where the deeming rates may settle". The next change can take effect on 20 March 2027.

How savings are split between accounts we arrange, such as high interest cash accounts and term deposits, and bonds, managed funds and shares, affects both the income they produce and how they sit alongside the pension. Your adviser can look at your assets, show how deeming applies to them, and check how a change to the mix could affect your income and your pension.

If you receive a part pension or expect to apply for one, please talk to your adviser about what the new deeming rates mean for you.

This article is general information only. It does not take into account your objectives, financial situation or needs, and it is not a recommendation to buy, sell or hold any investment. Figures are as published on the dates given. Past performance is not a reliable indicator of future performance. Read the full risk warning