While much of the discussion has focused on higher Age Pension payment rates and broader cost-of-living relief, the increase in deeming rates is likely to have a more nuanced impact on retirement income planning. For advisers, it serves as a timely reminder that retirement outcomes are influenced not only by how much income a client receives, but also by how that income is assessed under the Age Pension means test.
For clients approaching or receiving Age Pension entitlements, this distinction can materially alter total retirement cashflow. This is particularly relevant when comparing traditional account-based pension strategies with lifetime income streams such as Allianz Guaranteed Income for Life (AGILE) and Allianz Guaranteed Income for Life: Super+ (AGILE Super+)1.
The significance of deeming
Deeming is the mechanism used by Centrelink to assess income from financial investments. Rather than assessing the actual income earned, Centrelink applies prescribed deeming rates to the value of a client's financial assets to determine the amount of income counted under the Age Pension income test.
As deeming rates increase, so too does the amount of income assessed from financial assets.
For retirees relying primarily on:
- account-based pensions
- cash investments
- managed funds; and
- term deposits,
the result may be higher assessable income across a range of social security entitlements. For some clients, this may result in:
- reduced Age Pension entitlements
- lower Commonwealth Seniors Health Card eligibility margins; and
- less total retirement cashflow.
Why this matters for retirement income planning
One of the most common misconceptions among retirees is that receiving more actual income in hand will necessarily result in a lower Age Pension entitlement.
In reality, the Age Pension system assesses different retirement income structures differently.
This means two clients generating similar levels of retirement cashflow may receive very different Age Pension outcomes depending on how their retirement assets are structured.
As deeming rates rise, those differences may become increasingly important.
AGILE Case Study: same income levels but different social security income assessment
Helen, age 67, has:
Strategy 1: Account-based pension (ABP) Only
Helen invests her entire $800,000 into an ABP in a ‘balanced’ portfolio and she elects a pension payment of $45,000 per year to fund her retirement lifestyle.
While Helen receives $45,000 of cashflow from her pension, Centrelink does not assess the actual amount received. Instead, it assesses deemed income based on the account balance of the ABP at prevailing deeming rates.
With the increase in deeming rates from September 2026, the amount of assessable income attributed to Helen's portfolio will be higher than under the previous deeming settings1.
Depending on her circumstances, this may lead to:
Strategy 2: AGILE with ABP by changing the underlying investment mix
Rather than having multiple super product providers, Helen keeps her existing $800,000 ABP in a balanced portfolio.
However, instead of holding the entire portfolio in traditional growth and defensive assets, she reallocates $200,000 of the defensive allocation to AGILE as an underlying investment, while retaining the remaining $600,000 in other assets which are rebalanced annually to maintain a ‘balanced’ asset allocation.
By allocating a portion of underlying defensive assets to AGILE, this allows Helen to continue enjoying:
At the same time, AGILE provides a regular, guaranteed lifetime income stream from within her broader retirement portfolio.
For the income test, the remaining ABP balance of $600,000 will be subject to prevailing deeming rates. However, the AGILE investment generates nil income whilst in Growth Phase as she is over age 65, and just 60% of lifetime income payments will be assessed when she chooses to commence payments in the future.
As a result:
- Helen will receive ongoing guaranteed income payments from AGILE that will not stop or drop during her lifetime
- the amount assessed under the Age Pension income test will differ from the income assessment that would apply if all assets remained subject to deeming
- her Age Pension entitlement may therefore differ from the account-based pension-only strategy; and
- Helen’s overall retirement income will be less vulnerable to increases in deeming rates or market downturns.
The advice opportunity
While the immediate focus may be on social security outcomes, advisers should not overlook the broader retirement planning implications of utilising guaranteed lifetime income streams for retirees. A lifetime income stream can also contribute to:
- improved retirement cashflow certainty
- reduced reliance on portfolio withdrawals
- enhanced management of longevity risk; and
- greater diversification of retirement income sources.
This becomes particularly relevant as clients become increasingly concerned about the sustainability of retirement income in an environment of rising living costs and a changing regulatory environment.
Overall, as deeming rates rise, advisers may benefit from revisiting clients who:
- are currently receiving a part Age Pension or will be likely to in the near future
- sit close to Age Pension eligibility thresholds
- are concerned about longevity risk; or
- rely heavily on account-based pension drawdowns.
For these clients, modelling different retirement income structures may reveal material improvements in overall retirement outcomes.
For advisers, this reinforces the value of looking beyond investment returns alone and considering how different retirement income strategies interact with the social security system.
Clients with identical retirement savings can experience very different Age Pension and total income levels, depending on how their income is structured. Retirement income solutions such as AGILE and AGILE Super+ issued by Allianz Retire+ may offer benefits that extend beyond income certainty, potentially influencing improved Age Pension outcomes and overall retirement cashflow.