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

If you’re receiving the Age Pension or other social security payments, you’ve likely heard about changes to “deeming rates” taking effect on 20 September 2025. But what exactly are deeming rates, and how might these changes affect your payments?

Understanding deeming rates

Deeming rates are part of how the government calculates your Age Pension and other social security payment entitlements. When you have financial assets like savings accounts, term deposits, shares or managed funds, the government and Services Australia don’t assess your actual investment returns for pension purposes. Instead, they assume (or “deem”) that your investments earn a set rate of return, regardless of what they actually earn.

Currently, there are two deeming rates: a lower rate of 0.25% that applies to the first $64,200 of your financial assets (if you’re single), and an upper rate of 2.25% that applies to amounts above that threshold. For couples, the lower rate applies to the first $106,200 of combined financial assets.

The changes

From 20 September 2025, these rates will each increase by 0.5%. The lower deeming rate will rise from 0.25% to 0.75%, and the upper rate will rise from 2.25% to 2.75%.This marks the end of a freeze that’s been in place since May 2020, when rates were reduced as an emergency COVID-19 measure.

The government extended this freeze multiple times to help shield pensioners during economic uncertainty. However, with inflation easing and investment returns now higher than they were during the early pandemic, the government believes it’s time to gradually return rates to more normal levels.

Who will be affected?

Not everyone will see changes to their pension payments. You’ll only be affected if you’re currently receiving an income-tested rate of pension (rather than an assets-tested rate) and your total income exceeds the income-free area for your payment type.

According to government data from June 2025, almost 5.4 million people receive an income support payment, but only around 771,000 have their payment rates affected by deemed income. About 60% of these affected social security recipients are Age Pension recipients, who tend to hold more financial assets than people who get other payments.

Here’s some potentially good news, though: the deeming rate increases coincide with the regular indexation of pension payments on 20 September. Indexation typically increases payment rates to keep pace with cost-of-living changes.

Government modelling suggests that most recipients affected by the deeming rate changes won’t actually see their fortnightly payments decrease when both changes are considered together. In fact, many people are expected to still see a net increase in their payments due to indexation being larger than the deeming rate impact.

For example, a single Age Pension recipient with $200,000 in financial assets and no other income will receive the full indexation increase of $29.70 per fortnight, because the deeming rate change won’t affect their payment rate at this asset level. With $300,000 in financial assets, they’d still see a small indexation increase of $4.70 per fortnight.

Looking ahead

Now that the deeming rate freeze is ending, the government says future rate adjustments will be guided by advice from the Australian Government Actuary, with changes typically occurring on the regular payment indexation dates (20 March and 20 September each year).

If you’re concerned about how these changes might affect you, consider speaking with Services Australia or a financial adviser. Remember, if your investments are earning more than the deeming rates, any excess returns don’t count as income for pension purposes, which is an incentive to seek reasonable returns on your investments.

Source: Services Australia - Age Pension - Deeming  
Ministers for the Dept of Social Services - Changes to Social Security Payments from September 20 2025