It’s hard living on a fixed income.
Just ask anyone who tries to do so.
To make it harder still, try living as a single on the Age Pension - $17469 per annum, about $2526 short of what the ASFA-Westpac retirement index calls a modest lifestyle ($19996).
Now add an interest rate increase – and we’ve had four in just six months.
How quickly is this rate increase passed on by the major banks?
In a heartbeat!
Sometimes, in the case of Westpac, customers are slugged with an increase even higher than that suggested by the Reserve Bank.
So any objective person might deduce that what is lost on the wing will be gained on the roundabout. Rising interest rates will mean more interest earned on savings accounts, right?
Wrong.
Pensioners are finding this out this week. The pension has increased by $29 per fortnight for singles and $44 for couples.
But deeming rates have also been increased. This means those with cash invested will now be deemed to have earnt a higher amount, whether they have or not, and this will, in many cases, affect the amount of pension they will receive.
‘So what?’ you ask, if they are earning more.
But here’s the rub.
The banks are not necessarily passing on the higher interest rates to those with cash deposits.
Furthermore – and this is the real killer – three out of the four major banks, as reported by Fairfax media, have actually reduced the amount of interest paid to those with term deposits.
Why?
How can interest rates be increased for those who borrow but decreased for those who save?
Isn’t the message from the Federal Government that we all need to save harder to fund our own retirements? Why bother if banks can refuse to pass on market rates when we invest our savings? Better indeed to keep those hard earned dollars under the mattress?
Are you also affected? Let us know – we have shared this comment with Finance Minister, Lindsay Tanner, Community Services Minister, Jenny Macklin and Opposition MPs, Joe Hockey and Bronwyn Bishop – and now await their responses.