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CHANGES to deeming rates will affect both pensioners and partially self-funded retirees.
The good news is that pensions are going up. The bad news (potentially) is that deeming interest rates are going down.
For many - the Federal Government estimates 600,000 - it will mean a larger government pension as they are "deemed" to earn less income from investments.
But the lower real investment income will hurt others who might have to adjust their financial strategies to try to make up the lost income.
The deeming rate has been reduced by 0.5 per cent.
The half per cent reduction would mean a loss in income on $55,800, if held in a bank's deeming account, of $279 a year - enough to pay the winter heating bill.
RetireInvest's technical manager Jennifer Brookhouse says many retirees will benefit from the reduction because their current investments are earning more than the current deeming rates.
However, Mrs Brookhouse says clients who stand to lose income through the lower deeming rates will need to put some thought into their investment mix.
The solution will not be the same for everyone.
She says individuals and couples should have their money invested with three needs in mind - regular income, emergencies and growth.
"In this low-interest environment, it makes sense to look at higher return investments, particularly for nonessential income needs," she says.
For a single person, the first $33,400 in certain asset classes is deemed to earn 2.5 per cent, down from 3 per cent.
Any extra will be deemed at 4 per cent.
For a married couple the threshold is $55,800.
Under deeming rules, those with investments earning more than 2.5 and 4 per cent are effectively earning a bonus which is not assessable as income for the purposes of determining pension payments.
The bad news is for those who have their investments in cash with Australia's major banks.
Any cash held in official bank "deeming accounts" will see the interest paid on those investments fall to the new levels, meaning less income.
This includes cash with financial institutions, term deposits, shares, loans, debentures, managed investments and, if you are over age pension age, superannuation and rollovers.