The truth about retirement

Many Australians are forced into retirement so delaying access to super makes no sense.

The truth about retirement

Yesterday’s Productivity Commision Report on superannuation canvasses an increase in the preservation age. But hidden in the report’s detail is the reason why this must not happen.

As reported by Drew yesterday, the top-level statement in the Commission’s report, Superannuation Policy for Post-Retirement, was the suggestion that the preservation age (currently 55, due to move to 60 by 2025) be further increased to 65, thus saving the nation $7 billion per annum. Arguments to move the preservation age include such massive savings and the need to better match the Age Pension entitlement age (currently moving from 65 to 67, with an increase to 70 preferred Abbott Government policy). Another aspect of the report that received a lot of media attention was the confirmation by the Productivity Commission that so-called greedy baby boomers are actually not ‘double dipping’ into their superannuation by withdrawing lump sums to waste on travel, expensive toys and living the high life, then resorting to the Age Pension a few years later. The Commission instead found that most retirees are very careful with their savings, with fewer than one third taking an early lump sum and those doing so usually having only a modest balance, typically less than $50,000.

But while these aspects of superannuation grabbed the headlines, the most important finding of the report was buried in the detail, in Volume 2: Supplementary Papers. And this is the high level of involuntary retirement, with 70 per cent of those who retire when aged 45-49 doing so mainly due to reasons of ill health, and around 35 per cent of those aged 60-69 retiring involuntarily due to health or redundancy.

Read the full report:

Volume one

Volume two

Opinion: Whose money is it?

These statistics reveal the stark truth about retirement; a large whack of people actually did not wish to stop work – they were forced to do so. So when they cannot automatically self-fund their later years this does not mean they are lazy or financially irresponsible. It means they have had less opportunity than others to achieve the necessary level of savings.

So what does this mean for the Productivity Commission’s suggested policy of raising the preservation age? Well the Commission nailed the first possible response, itself, stating, “Changes in preservation age will have little effect on workforce participation.”

And that is patently obvious if more than one third of retirees didn’t want to leave the workforce, but were forced out by ill health or redundancy.

So why would you lift the preservation age? To use a time-honoured colloquialism, I’m b******* if I know!

It will mean those who are forced out of work will need to wait much longer to access their own money. So they will be forced back on welfare, applying for the measly Newstart, which has to be the most inaccurately named ‘benefit’ of all time.  

As the Commission has also noted, “The involuntary retired are frequently less wealthy … and have lower levels of education”, thus confirming everything we have ever suspected about the paralysing grip of lifelong disadvantage.

So what gain is there to be had by changing the preservation age for those who did not retire by choice? None whatsoever, except it MAY save the government billions.

But not as much as tackling the overly generous super tax concessions that mainly favour the wealthy, as we’ve noted before.

The arguments about super are hotting up and the Productivity Commission’s report is very useful to more fully understand the nature of retirement and post-retirement income. But piecemeal suggestions are not policy. They are just more ad-hoc ideas and thought bubbles, no matter how well researched. As the Productivity Commission itself notes, a comprehensive inquiry into the whole field of retirement income is urgently required.

What do you think? Why did you retire? By choice? Or did poor health, carer duties, redundancy or other factors force you out? If you have to wait until 65 to access your super, how will you fund your retirement in the interim?





    COMMENTS

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    Travellersjoy
    8th Jul 2015
    10:21am
    Only morons, apparently most of the LNP and their cronies, could imagine people would live on the Age Pension by choice - more surviving than 'living'.

    Hundreds of thousands like me, women with little or no savings through political choices made by mostly Liberal governments, not mine, and no convenient husband to support me, live close to penury on the Age Pension, thanks to the arrogant self-serving people on the Treasury benches in Parliament.

    Let nothing, including the truth, get between an affluent man and a pot of money! Too old for superannuation to be very helpful, I believed it would enable other younger women to live in more dignity and security when they left the work force. Instead I see superannuation being gamed by well off men at the expense of ordinary people, especially women, with the whole hearted (is that shrivelled up thing really a heart?) approval and connivance of the government.

    Very odd, but they still expect me and thousands of others they have neglected, abused, marginalised and trivialised, to vote for them at the next election.

    When only the 1%, or even the top 20%, have a reasonable living, who is left to vote for the LNP?
    thommo
    8th Jul 2015
    10:39am
    I agree with you 'travellersjoy". This Govt in particular has further downgraded/reduced the age pension across the board with the changes to the assets test from 1.1.17. While some age pensioners at the bottom rung of the ladder (ie with basically no assets) will get an extra LOUSY $15 per week, the rest of them will get a reduction and some will lose the pension all together. Instead of an increase of $15 per week, the increase should have been nothing less than $100 per week. This is just the start of this Govt's demolition of the pension entitlements, which is part of their philosophy and ideology. It is hard right conservatisim - no different to the tea party faction of the American Republican party. They look after the big end of town and the big earners, giving them big tax concessions on large super entitlements at the expense of deserving age pensioners and others who part of the social contract of this country. This govt has streaks of facsism
    TREBOR
    8th Jul 2015
    11:17am
    Totally agree with both. At this time - the super and Pensions to be allocated are indeed (working out how to express this) Their Money for superannuants and retirees, who've abided by the rules all their lives and thus are entitled to enjoy what they have.

    I know this leaves out changes to the mega-superannuants who many, including myself, deem to be abusers of the system, which I also deem to have been deliberately set up that way in order for mates and cronies of government to do so. However - any cuts to one are essentially a cut to all, since all abided by the rules in existence.

    On that basis, therefore, the money including that to be properly set aside for Pensions, is indeed Their Money to use as they wish, and should not become the plaything of governments (plural intended).

    In the future there may have to be changes, such as dumping the now shown to be unfair tax concession on super contributions compared to pension contributions which pay full income tax, placing that proportion of income tax supposed to be set aside to cover Pension into a sovereign fund untouchable by governments and lackeys, and the treatment of all retirees by the same rules as regards income - with my suggestion being that a reasonable Pension level for all apply, and a ceiling on untaxed additional income be set for all equally.

    It is possible that such a system could come into play immediately and retrospectively to include all, but none should be savagely disadvantaged as appears to be occurring under the current system of moving the goal posts so as to 'catch' a few more who are arbitrarily deemed to be the 'over-fat' cats.

    A properly organised and out of political control and free from old mates and cronies and defunct politicians copping yet another retirement package body to run the Australian Retirement Fund should contain a component for review of cases that are marginal and cause undue hardship. (Watch this space for fat cats to slip through - keep those cat traps tight and your powder dry)...
    TREBOR
    8th Jul 2015
    11:19am
    As for those forced to retire due to genuine ill health etc - full benefits from Day Zero of retirement. It's their money and the alternative is to offer a hefty insurance policy...
    TREBOR
    8th Jul 2015
    11:23am
    Anecdote: As a public servant, I had at one time the option of retiring in my 30's due to ill health.... and copping 2/3 of annual salary indexed for life. I refused on the basis that a gentleman does not accept such things.

    Now I see these vultures of politicians and their mates feeding well off the carcasse of this once great country and its retiring population, and exploiting everything for their own benefit and that of their chosen group, whether it be business, feminists, old school pals etc, etc, etc. Nowadays I'd take the money in less than a heartbeat.
    Reeper
    8th Jul 2015
    1:01pm
    Sadly Travellersjoy the only moron is you...not a single sentence addressing the actual subject, just your drivel or possibly dribble
    Anonymous
    8th Jul 2015
    1:04pm
    The trouble, Travellersjoy, is that we are being governed entirely by MORONS. Worse, we are being governed by self-serving, greedy, corrupt MORONS who have no respect for the people, the law, the constitution, or the nation. They have no integrity, no ethics, no morals, and no fundamental decency. And therefore we, the people, can have no hope.

    Yes, Trebor. I share your sentiments.
    MICK
    8th Jul 2015
    4:12pm
    I believe that my position of this government, and I dare say the other side of politics as well, is now coming around. I indicated that this government was intending to nationalise superannuation....so that it can peck away at the edges to cream off vast sums of money for it to waste. The jury may still be out but watch this space.....
    Cookiegirl
    8th Jul 2015
    10:30am
    These changes in super are only going to drive a downward trend in new people not committing any more than they legally have to and making those close to retirement very fearful of the future. When we talk about well being and mental health, we see that this govt ( and previous ones) have been actively contributing to the negative well being.
    Baby boomers contributed more than any other group to the financial success of this country. Many of us worked in our pre teen years ( I was ten when working after school in a local shop to earn enough to pay for school uniform) and started full time employment at 16.
    We were the ones who saved and scrimped to send children to private schools, took up private health insurance before it was compulsory and worked and paid all our taxes
    We were the ones who worked overtime and had two jobs to support our families as well as elderly parents.
    Still not enough? Now we are trapped working past our retirement age, backs and hips crippling us with the threat, the real threat of not being able to access our super nor the aged pension.
    Most retirees just want to pay off their mortgage and credit cards. Yes have a holiday that they have gone without for years because their kids needed their money and time.
    Get real Govt. do you really think that those you are bringing in in droves will pay taxes?
    ronnieb
    8th Jul 2015
    12:13pm
    Very well said cookiegirl!! you are spot on with a summary of the life of the average baby boomer. Being pushed into various super schemes with little or no background information then being told on retirement that you can't pay off your 12% interest rate mortgage. There should be a new subject introduced in high schools, "What you should do now to prepare yourself for retirement".
    KSS
    8th Jul 2015
    12:36pm
    ronnieb if you are still paying anything like 12.5% interest rate on your mortgage you only have yourself to blame. You could refinance quickly and quite easily to something in the region of 4.5% or less. No sympathy if you choose not to.
    PlanB
    8th Jul 2015
    1:02pm
    Yes so far KSS but I think Ronni was sort of stating what it MAY go to down the track, there are a LOT that will be caught out by this, like they were last time it went to 20% +
    KSS
    8th Jul 2015
    1:10pm
    PlanB if people are taking out mortgages now at the historically low rates without factoring in a rise to at least 10% interest, they only have themselves to blame when rates rise (as they inevitably will) and they can't make the payments.
    MICK
    8th Jul 2015
    4:14pm
    Peter Costello admitted on the 7:30 Report the other night that hardly anyone was putting in more than the compulsory super contribution He cited the fact that governments keep making changes but more than likely I might think that people are feeling like their super is going to end up the government's super....and then start to disappear.
    thommo
    8th Jul 2015
    10:38am
    I agree with you 'travellersjoy". This Govt in particular has further downgraded/reduced the age pension across the board with the changes to the assets test from 1.1.17. While some age pensioners at the bottom rung of the ladder (ie with basically no assets) will get an extra LOUSY $15 per week, the rest of them will get a reduction and some will lose the pension all together. Instead of an increase of $15 per week, the increase should have been nothing less than $100 per week. This is just the start of this Govt's demolition of the pension entitlements, which is part of their philosophy and ideology. It is hard right conservatisim - no different to the tea party faction of the American Republican party. They look after the big end of town and the big earners, giving them big tax concessions on large super entitlements at the expense of deserving age pensioners and others who part of the social contract of this country. This govt has streaks of facsism
    MICK
    8th Jul 2015
    4:18pm
    I think that a contributor to this site worked out that you'd have to have $1.1 million invested to get the same amount of income as the current pension. So this bunch of misfits now wants to lower this figure to around $800 000? Bastards!
    Lets hope that we all REMEMBER when election time comes rather than listen to the glossy slick lying media presentations designed to make us vote for exactly the wrong candidate. I live in hope............. VOTE FOR AN INDEPENDENT whose preference is not going to this government and we have the opportunity of changing the political landscape.
    Golden Oldie
    8th Jul 2015
    11:22am
    This shows just how stupid the Liberal policies are. Most people cannot work until they are 70. They either retire due to injury or health or just plain tiredness, and if they lose a job after 45,50,55 it is just about impossible to get another job. Also youth unemployment is very high, so where are the jobs coming from. Then to make it impossible to use their OWN super funds until they are 70 is rediculous. Are they supposed to die from malnutrition, or barely exist on a