Famous investor Warren Buffet, has a saying that “Markets climb a wall of worry”: markets go up and down, but over the medium to long term, they go more up than down. When the news is negative and there is fear being spread, Buffet’s approach is to “be greedy” … to invest more. The markets know about the wars in Ukraine and the Middle East … they ‘fear’ conflict in the China sea … they fear that economies will stall with inflation still too high … but still they go up. It reinforces the strategy of sticking to an investment approach that you are comfortable with, knowing that it will go up more than it goes down. Just have enough cash for one to two years of spending.

For the last couple of years, Centrelink’s Deeming Rates have been frozen at low rates, reflecting the very low interest rates that we experienced for several years. When interest rates started to rise, the government froze them to allow pensioners to recover from the effects of the pandemic and then of inflation.

On July 1 this year, the cap on those low rates is due to be lifted. While the Income Test for the Age Pension hasn’t had much effect – most people were assessed under the Asset Test – the Income Test will now have a greater effect. For example, if only the upper deeming rate were to double to 4.5%, a homeowner couple with $30,000 of personal assets and $421,500 of financial assets (who currently receive the full Age Pension), will have their fortnightly pension reduce by approximately $37 each because of the income test.

Wishing you health and happiness.

Tom

at Financial Springs