YourLifeChoices member Colin is looking for a better return on an investment and wants to know if higher interest will affect his Age Pension payments.
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Q. Colin
I would like to make an inquiry as to how Centrelink treats an investment amount in a bank term deposit where the annual interest would be $8000.
My wife and I are both retired and not working, and the only income we have is the couple Age Pension for a homeowner. Centrelink does know about the investment but we are moving the money to another bank to get a slightly higher return.
Does this interest qualify as a couple’s earning allowance before they reduce our pension? We are also under the asset allowance.
Read: How much is the Rent Assistance payment increasing?
A. The value of your investment counts in both the assets test and your income test.
Centrelink assesses income streams using their current account balance. They use the current balance for account-based investments such as your term deposit.
When calculating income from these types of investments, Centrelink applies the deeming rules. The deeming rules use the gross value of your investments to calculate the amount of ‘deemed income’ they will include in the income test.
Deeming is a set of rules used to work out the income created from your financial assets. It assumes these assets earn a set rate of income, no matter what they really earn.
This helps keep your pension payments steady instead of going up and down based on the performance of your assets.
It also provides an incentive to find the best investment because any interest rate above the deeming rate doesn’t count as income.
So, for your investment, the assets test will remain the same. And because it is calculated by deeming rules, your improved return will not affect your income for your Age Pension.
To find out more on deeming, you can read this article.
Have you shopped around for investments? Was it worth the return? Why not share your tips in the comments section below?
