Pensioners CAN get 3.25% Government Guaranteed

Before we get into today’s article, something you should check out. My friend and colleague Greg Canavan is a very deep thinker.

In recent times, he’s turned his thoughts and considerable in

vesting talents to what’s happening in the gold market.

I’ve been impressed by the accuracy of his calls on the gold price…and he is firmly of the view there’s more upside to come. Greg expects gold to break above US$1,700 per ounce.

Greg has spent months researching the best way to capitalise on the momentum behind the gold price.

If you’re interested in Greg’s ‘Peak Gold’ analysis, please go here.

Now on to today’s piece…

National Seniors Australia has whipped up quite a media frenzy over the deeming rates.

The story goes something like this…pensioners are being treated unfairly because deeming rates (the amount government deems a pensioner should be earning on their capital) have remained unchanged since 2015…when the RBA cash rate was 2.25%.

Since then, the official rate has been cut to 1%.

Yet, pensioners are still being ‘deemed’ to earn 1.75% on the first $51,800 and 3.25% on the balance of their capital.

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As National Seniors Australia states on its website…

This is bad news for those with savings accounts and it reminds us again why we are fighting so forcefully for deeming rates to be lowered. 

The deeming rates affect the amount of pension you receive. 

To leave the rates unchanged for more than four years while there have been five interest rate drops by the RBA shows the government is balancing the budget on the backs of pensioners who have their money in savings accounts.

You can’t demand — as the Treasurer and PM have both done, that the big banks pass on the full cut when the RBA lowers its rate and not do the same for pensioners. It’s not a good look.

What’s the answer to this ‘unjust’ treatment?

The deeming rates must be adjusted. If the deeming rate is not dropped by the full 1.25% for amounts above and below $51,800, it will be manifestly unjust. The government has been banking the difference for more than four years.

As reported in The Guardian on 9 July 2019, the opposition has taken up the pensioners cause…

Labor and seniors groups are calling on the government to act urgently, saying more than 600,000 people are being short-changed because the government is overestimating how much they’re earning from their investments.

All the media reporting I’ve heard and read says ‘it’s not possible to earn 3.25% on your money in the bank.’


Before I answer that question, here’s a bit of history on the deeming rate.

A bit of history on the deeming rate

In the really old days, Social Security used to assess the actual income received from each individual investment. Pensioners would deliberately put their money in low interest accounts, to stay under the Income Test threshold.

The whole individual assessment process became so complicated, labourious, error prone and open to abuse, the government decided it would be far easier to apply a ‘deemed’ rate to the pensioner’s capital.

Whether you earned that rate or not, was irrelevant.

The change forced pensioners to seek out term deposits and other investments that delivered a higher return than the deeming rate.

The introduction of the deeming rate provided the banking industry with a marketing opportunity.

The banks started to roll out savings accounts — to eligible age pensioners — that paid the government’s deemed rate of return.

The new product was true to label…‘Pensioner Deeming Account’.

All was going well until the RBA took rates below 3% in 2013…

Australian Cash Rate Target - 12-07-19

Source: RBA

[Click to open in a new window]

The deeming rates (sourced from the Department of Social Security) did not move down in tandem with the RBA cash rate.

The Deeming Rates (sourced from the Department of Social Security) did not move down in tandem with the RBA cash rate - 12-07-19

Source: Dept of Social Security

[Click to open in a new window]

With the cash rate dropping like a stone, offering accounts that matched the much higher deeming rate became a real challenge.

The word ‘deeming’ was airbrushed out and replaced with something ‘warm and fuzzy’…the rebranded product would now be known as the ‘Pensioner Security Account’.

This is where we disprove the universally held view ofit’s not possible to earn 3.25% on your money in the bank.

This is a screen shot from Canstar on the financial institutions that offer ‘Senior Savings Accounts’.

If you want to see it with your own eyes, go here.

Screen shot from Canstar on the financial institutions that offer ‘Senior Savings Accounts’ - 12-07-19

Source: Canstar

[Click to open in a new window]

There are two financial institutions — Teachers Mutual Bank and UniBank — that do match the deeming rate.

And just to confirm the Canstar data is current, here’s a screen shoot from the Teachers Mutual Bank website — click here.

Teachers Mutual Bank - 12-07-19

Source: Teachers Mutual Bank

[Click to open in a new window]

Now, I know what most will be thinking: Are these banks safe?

The short answer is: yes.

This is a screen shot from the APRA site on ‘Authorised Deposit-taking Institutions (ADIs)’.

Again, if you want to see it with your own eyes, here’s the link…click on ‘Australian owned Authorised Deposit-taking Institutions’.

Any institution on the APRA list is covered by the Australian government deposit guarantee…up to $250k per account holder.

The list is in alphabetical order.

The deeming rate is going to be cut

I purposefully started the screen shot with Suncorp-Metway Limited and ended with Westpac Banking Corporation, to show that ‘Teachers Mutual Bank — which includes UniBank’ — is on the same list as two of Australia’s most recognisable banks.

Teachers Mutual Bank - 12-07-19

Source: APRA

[Click to open in a new window]

PLEASE NOTE: Teachers Mutual Bank and UniBank operate under the one principal ADI licence…Teachers Mutual Bank Limited.

Therefore, the Government Deposit Guarantee is limited to a total of $250k (per account holder) deposited under the principal licence holding ADI.

For more information on this important point, here’s the link to the Financial Claims Scheme website.

PLEASE NOTE: This is not a recommendation to invest in Teachers Mutual Bank or UniBank.

You need to conduct your own due diligence on whether the product offerings are suitable to your personal situation.

With those technical details covered, let’s get back to the main message of today’s article…it is possible for pensioners (but, not self-funded retirees) to access 3.25% on amounts above $51,800…with a Government Guarantee.

From all the commentary I’ve read and heard, no one has bothered to do a little digging to identify this window of opportunity.

As is so often the case, popular thinking has meant that no one is really thinking…just going along with the message of the day.

Pensioners should heed the wisdom of ‘be careful what you wish for, it may come true’.

Why would anyone with deposits in the Pensioner Advantage accounts — paying 3.25% — want the deeming rate reduced?

I wouldn’t.

If it was me being affected, I’d be saying under my breath…‘National Seniors Australia, please shut up. Let sleeping dogs lie.’

But the momentum is too great. The deeming rate is going to be cut.

When and by how much is, as yet, unknown.

My promise to you is that when we know the details, I’ll do some digging around to see if there are any windows of opportunity that mainstream media has neglected to identify.

In the interim, you may wish to look at whether the Teachers Mutual Bank and/or UniBank accounts are suitable for your needs and/or those of your pensioner relatives.


Vern Gowdie,
Editor, The Rum Rebellion

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Vern has been involved in financial planning since 1986.

In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners.

His previous firm, Gowdie Financial Planning, was recognised in 2004, 2005, 2006 & 2007, by Independent Financial Adviser magazine as one of the top five financial planning firms in Australia.

In 2005, Vern commenced his writing career with the ‘Big Picture’ column for regional newspapers and was a commentator on financial matters for Prime Radio talkback.

In 2008, he sold his financial planning firm due to concerns about an impending economic downturn and the impact this would have on the investment industry.

In 2013, he joined Fat Tail Investment Research as editor of Gowdie Family Wealth. In 2015, his book The End of Australia sold over 20,000 copies and launched his second premium newsletter, The Gowdie Letter.

Vern has since published two other books, A Parents Gift of Knowledge, all about the passing of investing intelligence from father to daughter, and How Much Bull can Investors Bear, an expose on the investment industry’s smoke and mirrors.

His contrarian views often place him at odds with the financial planning profession today, but Vern’s sole motivation is to help investors like you to protect their own and their family’s wealth.

Vern is Founder and Chairman of The Gowdie Advisory and The Gowdie Letter advisory service.

The Rum Rebellion