Mr Price asked the Minister for Veterans' Affairs, upon notice, on 5 November 1996:

(1) Is the Minister able to say whether any bank or credit union offers an interest rate of 5% or 7% to depositors.

(2) How many clients of the Minister's Department will be adversely affected by the new deeming rules.

(3) What sum will the Minister's Department save as a result of the new deeming rules in (a) 1996 and (b) a full year.

Mr Bruce Scott —The answer to the honourable member's question is as follows:

(1) At the end of December 1996, major financial institutions offered "pensioner deeming accounts" to service pensioners. These accounts replicate the current deeming rules in offering 5% and 7% to depositors, depending on the total balance. Currently, some financial institutions also offer 5% for the first $2,000 invested in pensioner deeming accounts.

With the reduction in deeming rates to 4% and 6% effective from 23 January it is expected that the interest rates for pensioner deeming accounts will also reduce to 4% and 6%.

(2) At the time this initiative was developed there were an estimated 121,000 service pension accounts that attracted less than 5%, with the approximate number of service pensioners affected being 100,000. The average reduction of service pension under the current deeming rates is estimated at less than $1.00 per fortnight.

Pensioners who lose pension can actually increase their overall income by choosing to place their money in investments which return at least the `below threshold rate', currently 5%, on the first $2000 (for single pensioners) or $4000 (for pensioner couples). Whilst assessing more interest may mean a lower pension rate, the total income for the pensioner would go up because the pension only reduces by $0.50 for each $1.00 earned. Pensioners who will not be affected by this initiative are those with small amounts of financial assets, that is single pensioners with less than $44,900 and pensioner couples with less than $78,100.

(3) Estimated savings are $349,000 in the financial year 1996/97 and $2.467m in a full year.

For your information: Effect of Change to Deeming Rates:

With the reduction in deeming rates to 4% and 6% from 23 January 1997 there will be some impact on these estimates of the number of pensioner accounts affected. However, on current figures available it is not possible to determine the extent of this impact. We can indicate that the amount of financial assets pensioners can have without being affected by this initiative will increase to $49,573 for single pensioners and $91,201 for pensioner couples.