Pension taper trap hits savings of middle income retirees

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A quarter of Australians approaching retirement face spending their savings or losing access to disposable income from the Age Pension, putting them at increased risk of running out of money.

That’s the view of Spending in Retirement, a paper written by Andrew Boal, chief executive of actuarial firm Rice Warner, for the Actuaries Institute. It argues that the means test applied to retirement savings encourages older Australians to spend their nest egg before they retire.

Though most Australians have so far proven to be cautious in their spending, the paper says complexity around the means test also makes it difficult for retirees to plan for the future without professional guidance.

“Without assistance, it is impossible for the layperson to know how much to withdraw and when deferred lifetime annuities (DLAs) might be a suitable product given their circumstances,” he said. “We need to find a way to deliver appropriate advice cost effectively to help the growing number of people entering retirement with sufficient superannuation savings to encounter these problems.”

Mr Boal identifies a ‘middle group’, likely to be eligible for a part Age Pension for much of their retirement, as most needing guidance.

These Australians have $300,000 to $800,000 in retirement savings. This group, according to Investor Daily, “covers around 25 per cent of retirees currently, but it is expected to grow to more than half of the population”.

“If a retiree has less than $300,000, they will be entitled to a full Age Pension for most, if not all, of their retirement as their main source of income,” says Investor Daily. “Meanwhile retirees at the other end, with more than $800,000 and home ownership, will be less likely to be eligible for any Age Pension.”

A mid-income retiree could lose as much as $40,000, according to the Spending in Retirement report, which adds that the more they save, the worse off they are.

The taper rate acts to restrict a retiree’s access to Age Pension payments based on the level of their assets through retirement.

Prior to 2017, the taper rate was set at $39. But from 1 January 2017, a retiree’s annual pension was cut by $78 for every $1000 of assets held above the relevant thresholds.

This ‘taper trap’ “encourages some retirees to spend their savings quickly, and risk living on the Age Pension alone”, the Actuaries Institute claims.

If a retiree has less than $300,000, they will be entitled to a full Age Pension for most, if not all, of their retirement as their main source of income.

“While the system needs to be affordable and fair, it also needs to help Australians spend their money in retirement.”

Mr Boal urges an “equitable taper rate that does not unduly encourage retirees to spend their savings too quickly”.

“The wealthy end will be okay: they can afford to get their own advice and have enough money to get by reasonably well,” he said.

The lower-income people generally use their smaller account balances to subsidise the Age Pension. But the middle group is really in need of advice and new retirement products, to give them the confidence to spend their savings, so they can afford to live as good a lifestyle in retirement as possible.

If, according to Mr Boal, one of the objectives of the superannuation system is to “facilitate consumption smoothing over the course of an individual’s life”, and during retirement, then this ‘middle’ group would benefit from:

  • encouragement to acquire longevity protection to give them more confidence to spend their savings during retirement
  • a fairer taper rate that does not unduly encourage them to spend their retirement savings too quickly
  • low-cost access to information, guidance, and advice to help them make better decisions about their retirement.

The report says that longevity is one of the major risks faced by retirees and that the system should provide retirees with the confidence to safely spend more – “enjoying a better lifestyle, particularly during the early and more active years of retirement”.

The federal government’s Retirement Income Review is set to be handed down on 24 July.

Are you confident the taper rate will be part of the government’s review?

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Written by Will Brodie

127 Comments

Total Comments: 127
  1. 0
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    My single elderly neighbor over the road is a self funded retiree and she kicks herself for saving her butt off over the years to be self reliant. She did not spend the money on holidays, lavish home repairs, or new cars. Now she is still only a small bit over the limit, and gets NO help, no assistance. None.

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      fremdscham is alive and well. Your neighbour should focus more on her good fortune to be financially independent than jealous of the perks enjoyed by some of her cohort. There are many living off pensions who would gladly exchange places.

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      Farside you are the one green with envy here.

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      Retiring Well, remind me what envy do I have?

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      If this lady is single, ‘elderly’, a homeowner and has enough money to not be eligible for a Government pension, she must have assets worth more than $578,250. So what is she ‘saving’it for?

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      Maybe she is saving the 500 k so that in ten years time she is not left trying to scrape by on just the old age pension. People are living well into their 80s these days and a single old age pension is not much.

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      She may be saving because she anticipates high health care costs down the track, or perhaps she will need to pay for household repairs or household help. Or maybe she wants to have good quality aged care. But having saved to afford those comforts, she is now expected – by greedy people – to spend her savings for the sole benefit of the taxpayer and no benefit for herself, while the greedy people who spent up big during their earlier life live off the taxpayer and call people who want to benefit from their own money ‘selfish’.

      If the government doesn’t do something about the taper rate, those about to retire will be increasingly tempted to blow their savings and claim a pension, because there is simply no benefit in having a little more and losing the pension.

      BTW Farside – there is NO good fortune in having savings. It’s a result of hard work and careful planning and management. Those savings didn’t fall from the sky. But somehow those who didn’t save seem to think those who did were ‘lucky’ and should forfeit all the benefit they earned and just gift their savings to people who didn’t strive so hard.

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      She may be saving because she anticipates high health care costs down the track, or perhaps she will need to pay for household repairs or household help. Or maybe she wants to have good quality aged care. But having saved to afford those comforts, she is now expected – by greedy people – to spend her savings for the sole benefit of the taxpayer and no benefit for herself, while the greedy people who spent up big during their earlier life live off the taxpayer and call people who want to benefit from their own money ‘selfish’.

      If the government doesn’t do something about the taper rate, those about to retire will be increasingly tempted to blow their savings and claim a pension, because there is simply no benefit in having a little more and losing the pension.

      BTW Farside – there is NO good fortune in having savings. It’s a result of hard work and careful planning and management. Those savings didn’t fall from the sky. But somehow those who didn’t save seem to think those who did were ‘lucky’ and should forfeit all the benefit they earned and just gift their savings to people who didn’t strive so hard.

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      So define ‘elderly’. She may not have 10 years!

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      Youngagain, I wonder whether you recognise “good fortune” – it means having had the opportunity to save and not having setbacks take it away from her. It is her choice to sit on her money but don’t cry about others receiving a pension while she does not need one. She is in the fortuitous position of having a choice over how she spends or saves her hard earned – that choice, priceless. There are plenty of elderly people that have eked out an existence while living in poverty all their lives and could never dream of spending up big. Why do you feel that this old gal needs special recognition? Good luck to her if she is saving for repairs or help or aged care or just keeping it, that’s what elderly people do.

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      What a load of bollocks, Farside. EVERY Australian of our generation – except the small percentage of genuinely disabled and perhaps some who were widowed with a family – had the opportunity to save. Vast numbers CHOSE not to, and of course they now claim they didn’t have the opportunity and that those who did were ‘fortunate’, but it’s garbage. I eked out an existence living in poverty for 30 years, and I was forced into early retirement by ill health, but I still saved for retirement. If I could, so could others. I can’t find a pensioner retiree who didn’t earn twice my income and have far more opportunity than I could ever dream of.

      And NO, the poor self-funded retirees DOES NOT have a choice about anything other than whether to spend quickly and enjoy their early retirement and be poor later, or spend slowly and give all their savings to the taxpayer, and STILL be poor later. She CANNOT save for future repairs or aged care, because a stinking system denies us all that privilege and forces all but the wealthy into hardship. That’s why the system is wrong. It denies us any reasonable choice, denies us the benefit of saving, and encourages people to manipulate to qualify for the pension.

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      Well she’s only a small bit over no doubt she’s spending money to live and very soon WILL be eligible for the pension/benefits.

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      She’ll get a pathetic pittance, Greg, while neighbours who throw fifty dollar bills down the throats of poker machines every week get around $1 million from the taxpayer purse. Great system some of you are endorsing!

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      That’s what I was thinking, Greg. Actually, the article quotes: “…Meanwhile retirees at the other end, with more than $800,000 and home ownership, will be less likely to be eligible for any Age Pension.”

      According to this, the elderly lady is already WELL within the “extra benefits” income bracket. She should already be easily eligible, on a reduced Old Age Pension. This lady is rich and secure, however she made and saved her money! Has she or hasn’t she got over $800,000? I think you’re making up her misery, olderandwiser.

      As a small business partner and recipient of Jobkeeper, I’m receiving a regular income for the first time in twenty years. It’s amazing! I can plan spending for the first time in ages and the assurance of that regular payment is simply life-changing. If someone has a regular payment from OAP they should be happy.

      Perhaps the solution is to have a much sharper tapering at the richer end of the pension eligibility, to stop what can only be called middle class welfare in the form of a pension to very wealthy people, when that OAP was designed to look after people who don’t have adequate Super to fund their retirement. Crumbs, the mega wealthy still get Seniors’ cards and all the benefits, even if they don’t qualify for ANY OAP or those perks! That’s upper class welfare!

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      You are quite right older&wiser
      People that save for their old age get penalised by our system
      Like other civilised countries we should have Universal Pensioon.

  2. 0
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    The Australian Pension system stinks. You save all your working life and then no pension, no fringe benefits. My solution is give everyone a full Age Pension and tax all income including super if you are streaming. Then everyone is equal. No income or asset test.

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      Agree completely. This would be a much fairer system.

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      If you’re going to tax ALL, then people, like me (on the full DSP, and, then when eligible, the full Age Pension), with no savings or super, no investment in a home, just my household goods and a 14 year old car will be taxed just to have a full refund in July. What’s the use of that if you ‘need’ the income during the year, and not a lump sum at tax time?

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      Hi SuziJ the DSP is non taxable and you would pay no tax on it. Once you are on the AGE pension you would be eligible for the Seniors and Pensioners tax offset SAPTO , plus LITO (Low income tax offset) and pay no tax. Centrelink would not withhold any tax from your pension. At least that is the way I believe it works currently.

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      Not possible to make it equal in practice!
      Just look at the Communist systems which believes in equality but never works in practice!
      People who have worked all the lives and are on the full pension in effect are living off the taxes they paid so they deserve it!
      Lastly, when one thinks about it, it is not worthwhile having accrued a lot of money unless when prefers to have a more luxurious lifestyle in their remaining 20 to 30 years!
      Really! One cannot take the wealth with them to the other side so happiness is the most important thing in life and that comes with being free from worry, being healthy and living comfortably within one’s means.
      We are spiritual beings, after all!

  3. 0
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    Yes & this is the reason of why I believe there should be only income testing (ATO). If true to current form, this July review will be another marketing exercise & produce nothing.

  4. 0
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    It is amazing that so many who are really well off still keep trying to get the age pension as well. Be grateful you don’t have to rely on it.
    It is almost a perverse reversal of the Tony Abbott cry of “wealth jealousy”.
    Most of those who possess that degree of financial security achieved it through favourable tax concessions that were simply not available to the less fortunate.

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      Your jesting I believe. I certainly would not like to live on the return on $1 million today. Only have $500,000 and you have heaps more income.

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      Tanker some people did not negatively gear property, we just worked ,saved and paid taxes. And for most of my life I was promised a dignified Age Pension and not income and asset tested Welfare.

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      and don’t forget the cognitive dissonance when it comes to spending capital if the returns on it don’t provide an adequate income in retirement

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      Tanker, you obviously have no comprehension of the problem. This is nothing to do with ‘wealthy’ people. This is about people who do not have sufficient income to live on. Many have much less than aged pensioners. The people referred to in this article have modest savings, little income, and want to BENEFIT from their savings – not GIFT every cent to the taxpayer.

      If you went without holidays to put an extra $50,000 in the bank, would you be content to forfeit $50,000 in pension income and just spend your $50,000 savings? I don’t think so. You would expect to be a little better off for having saved. And so do the people you are referring to – and rightly so. But of course we can keep being nasty about them and supporting a system that is unfair to them, and they will be sorely tempted to spend all their savings quickly so that they actually DO get some enjoyment from them, and then the cost of pensions will skyrocket.

      Farside, your envy is showing, and it’s not nice. It’s nothing to do with ‘cognitive dissonance’. It’s about fairness, equity, and what’s good for the nation. But you keep taking your nice pension cheque and insisting that others should be punished for saving well.

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      Youngagain, what envy? I have no pension, never received a dollar from the government. I think you are projecting your set of values.

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      No Farside. I’m lobbying for what is GOOD FOR THE NATIONAL ECONOMY.

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      Strange way to lobby Youngagain by writing of my perceived envy of the well heeled elderly living in penury.

      p.s. you are projecting austerity values and the national economy disagrees with you.

    • 0
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      No, Farside. YOU and the national economy are projecting austerity values. Everyone but the very rich must be equally poor. Can’t let savers benefit. Can’t make hard work worthwhile. It’s socialism at it’s worst.

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      You are confused Youngagain. The economy is not arguing for austerity. That seems to be the province of a certain group that want consumption spending reigned in and intolerance for others that choose not to live the same sort of cloistered lives as themselves. There are undoubtedly people who could have made better choices with spending but overall the economy is better off for it. We are undoubtedly living better lives today than our ancestors living austere lives did before us. You come from a very conservative place if this is socialism at it’s worst. Morrison would be surprised.

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      Youngagain, we’re not talking about someone who has saved just $50,000, so why even use that example?

      We’re talking about someone who has saved over $800,000. I guarantee they didn’t save it by not raiding the piggy bank once in a while! Or take an overseas holiday after a lifetime of slog and camping holidays only.

      The problem has mainly arisen because interest rates are so ridiculously low and people who have saved cash for retirement (like their parents did) aren’t getting any interest flow to fund their retirement.

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      Hooboo, I was referring to savings AN EXTRA $50,000. And plenty of people saved over $800,000 by sacrificing holidays and restaurant dinners and new cars. Savings at that level did not fall from the sky. The spendthrifts and bludgers and selfish folk love to pretend that somehow those with a little more were ‘more fortunate’. That’s BS. They worked harder and spent less freely. And now they are suffering for it – very unfairly. But yes, interest rates are the key problem. If they were even at the 7% they were at when I started work, there would be no problem.

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      I suspect there are plenty of folk sacrificing holidays and restaurant dinners and new cars but not sitting on $800k in savings … what are they doing wrong?

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      They left it too late in life to start making sacrifices, Farside. Or they spent the money they saved on other indulgences instead of investing and making it grow. And now they are insisting that they should have higher incomes than people who tried to position themselves to live off their own savings, and those who tried to be more responsible should suffer unfairly. Jealousy is a curse.

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      Jealousy is indeed a curse but who is jealous of whom? I am not hearing a chorus of pensioners arguing they should have higher incomes than the SFR. Glückschmerz can also be a curse.

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      Farside, there ARE vast numbers of pensioners with much higher incomes than vast numbers of SFRs. Those pensioners who do not should not begrudge savers their savings and certainly should not support a system that deprives people of what they earn and deserve.

      People who work hard and plan responsibly are entitled to complain when unfairly deprived such that those who didn’t strive as hard are better off. It’s disgraceful of you to suggest that such deprivation is acceptable.

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      Youngagain, do you have any facts to support your opinion “there ARE vast numbers of pensioners with much higher incomes than vast numbers of SFRs”?

      But let’s assume you are right, it does not mean those pensioners you refer expect or covet the incomes and assets of SFRs. Not all SFRs that worked hard and planned responsibly feel the need to complain on the little that pensioners get, they are busy getting on with life than fixating upon glückschmerz. Those that feel compelled to complain should take a moment to smell the roses and consider their situation – realise the way out of penury is in their hands, and there is a safety to catch them if they stumble and complaining will achieve little if anything. They are hardly deprived except out of a sense of taking personal responsibility for their predicament and working through it so they can at last enjoy their retirement.

      Government policy changes in this area are inevitable however they will reflect the changing financial profile of future retirees. The war generation and older boomers are dropping off the perch faster than before further reducing the proportion of retirees reliant on full pensions. Who knew, but there are already more SFRs than aged pensioners among young retirees at pension age.
      https://www.yourlifechoices.com.au/age-pension/news/profiling-australian-retirees

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      Farside, I DO have facts to support my statement (not my opinion – but a fact) that there are vast numbers of pensioners with much higher incomes than vast numbers of SFRs. And logic says that must be the case, since it takes only a simple mathematical calculation to evidence that generally a pensioner couple with $400,000 has a much higher income than a pensioner couple with $900,000. (Maybe you didn’t bother to actually READ this article before jumping on your high horse and throwing insults at me?)

      ‘What little pensioners get?’ Garbage. The average pensioner gets around $1 million over the course of their retirement. They get far more than vast numbers of SFRs could even dream of earning. It’s NOT ‘little’. And they are NOT in penury, unless they have saved NOTHING for themselves over their entire working life.

      The issue for SFRs is that they are denied the right to use their savings in the way that is most beneficial for them. They are denied ANY freedom of choice. They are forced to either gift their savings to the taxpayer, or spend early in retirement and have too little later. That’s wrong. No matter how you try to justify it with your waffle implying there is something inherently wrong or selfish in expecting to be able to use your own savings for personal benefit, the fact is that the system is cruelly unfair and detrimental to the nation. And a lot of experts and government advisers are now recognizing this fact and lobbying for reform. And they are issuing valid warnings that increasing numbers of younger retirees will draw their super and spend it in order to qualify for a pension and be better off, as it is becoming more widely known among them that they will suffer punishment for retaining their savings and self-funding their old age.

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      Actually Youngagain, I did read the article and the referenced paper and also noted who funded the paper. It focuses on retirees with $300-800k in savings, “the middle group” and the need for them to have certainty in retirement and reduce longevity risk so they can spend their capital. Those with more than $800K in super and savings “often have the capacity to not have to draw down as much of the capital component of their savings”.

      The author writes “a higher taper rate does encourage retirees to spend their savings as quickly as possible until they become eligible for the full Age Pension, but there is little evidence that this occurs in practice”. However, he observes “many retirees will live an unnecessarily modest retirement or even behave as if they are in poverty” because of longevity risk, which is pretty much one of the themes you have been commenting.

      And the solution he proposes to this is the deferred lifetime annuity (DLA) to enable SFRs to push the exclusion of 60% of the cost of a DLA from the assets test until the annuity commences. This he writes “allows the retiree to more safely draw down the remainder of their savings up to that point, thereby enjoying a lifestyle that is better than would otherwise be the case during the early and more active years of retirement”. His words, not mine – actuaries love this stuff.

      In other words if you are concerned about longevity risk then purchase a DLA and ringfence a chunk of change from the assets test.

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      Except that option isn’t available right now, Farside – at least not in any reasonably acceptable form. He is saying reform is needed, which might include creating new products and offering new and more affordable advisory services. Right now, there is no solution for someone who is struggling to achieve a decent income, is excluded from the pension, and is aware of substantial future needs. There simply is NOTHING that they can do to enable them to secure their future. Check out the terms of the existing DLAs. They are a sick joke. You might as well convert half your savings to hundred dollar bills and burn them. And they all come with strong warnings that if the provider experiences economic challenges, you might actually get nothing in later years.

      And as for advice… Well, there are incompetent fools and there are greedy rip-off merchants, and if there are any advisers offering good advice at a fair price they are harder to find than a single spec of gold on a sandy beach.

      The reform we need is a fair pension system. Simple. It would cost far less because more people would save and plan for their old age. I canvassed a group of people aged around 50 at a party on the weekend. Every single one of them said they are contributing the minimum to super, do NOT support proposals to increase the levy, and plan to draw down and have a huge spend up as soon as possible, because the pension system is unfair to savers. I was surprised. I didn’t think people that young would be aware of the unfairness and planning already to circumvent the hurt it causes, but they are.

      Yes, an INDIVIDUAL with $800,000 might not need to draw down much on their capital. But the pension cuts out way, way below that. A couple with $850,000 is disqualified and they would struggle to get an income anywhere near that enjoyed by a pensioner with no other income. A couple with $850,000 has only $425,000 each and fits exactly into the category the ‘middle group’ the author referred to.

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      I don’t doubt the existing DLA are sketchy, just like the reverse mortgages and other equity release mechanisms, but nevertheless that is where we are at. I would not buy one but then I am not weighing up my options.

      Your party friends planning to spend up are a minority as Mercers found “there is little evidence that this occurs in practice”. I guess your friends are in that middle group?

      Don’t hold your breath waiting for that reform, when it comes will be looking decades ahead. I suspect best can hope for in the near term is reversing the 2017 taper changes.

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    A couple is better off with $500,000 than $1 million under our current welfare pension system.

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      the couple on a million can choose to spend some of their capital to supplement their incomes comfortable knowing there is a safety net when they have spent down $500k, no need for them to live in penury envious of the benefits their neighbours receive

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      Yes Farside, they can. They can choose to GIFT every last cent of the extra $500,000 to the taxpayer while the people who saved less get nice handouts. And they can CHOOSE to be poor later in retirement because, despite having saved, they were not allowed to preserve their savings to meet their anticipated future needs. But what they CANNOT do, is preserve a chunk of their savings for future needs.

      Furthermore, before retirement they can CHOOSE to dump Mum in an aged care home at government cost, buy a luxury caravan, tour Oz, and take a world cruise. And they will be richly rewarded in pension income. But they CANNOT choose to stay home and care for Mum themselves without sacrificing countless thousands in pension income – suffering huge penalties for doing what is better for the country. But some people are far too selfish to recognize just how absurd and detrimental the system is. They can’t see past ‘he has more than me so take it off him’.

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      Youngagain, nobody is taking those choices on how the millionaires spend their savings away from them. They are choices, and if living in austerity and preserving a chunk of savings for the future is higher priority than being comfortable in the near to medium term then nobody will stop them. They are not being penalised, they are making choices. And it is not up to the taxpayers to subsidise the lifestyle choices of those who do not require social security.

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      You are wrong, Farside. They have NO choice to preserve their savings for future needs. They HAVE to spend their capital to survive today because unlike the spendthrifts they have no other income to live on. They ARE being penalised, and why should they not have the same entitlements as a gambler or drinker who fritters all his money away. It IS up to the taxpayer to treat everyone equally and not unfairly favour the boozers and gamblers and holiday-makers and owners of luxury mansions over those who worked hard to fund comfort in their last years. The taxpayer DOES subsidize bad lifestyle choices – but only BAD ones. The people you are condemning DO require social security in order to enjoy the benefits they worked hard and saved to enjoy. You are promoting THEFT of those benefits, in order to redistribute them to people who make choices that are less beneficial for the nation.

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      Life must have been very sad for you Youngagain. I can assure you that not everyone receiving a pension has frittered the money away on booze, gambling, fancy cars, luxury mansions and holidays. Certainly there will be some who could have been a SFR if they had not gamed the system or made different choices but not everyone.

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      My life was very hard, Farside, but certainly not sad. I have had a very happy life and I am happier now than ever before. And I am aware that there are SOME (a very small percentage) pensioners who didn’t fritter money away. But does not mean we should condone a grossly unfair and economically harmful system that punishes those who did plan and work hard to be self-funded and reward the spendthrifts.

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      Farside, why would you think my life was sad because I object to unfairness? There is nothing ‘sad’ about expecting to be treated with respect and allowed to enjoy the proceeds of your own hard work and responsible lifestyle. What is sad is that selfish creeps want to deny people the benefits they earned – steal from them to give to people who didn’t earn. That’s a sad person. And it seems you are one of them.

      The system IS being gamed extensively, and it’s really sad that greedy people who can’t think past ‘he appears to have more than me so take it away from him’ endorse the continuance of a system that encourages and rewards gaming and punishes responsible life choices.

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      Youngagain, sad not because you object to unfairness but because of your attacks on the spending of people you cannot possibly know. I have no idea why you think I want to deny you benefits, let alone steal from you but your therapist might be able to help you manage your projections and review your prescriptions.

      Nobody is arguing whether the system is gamed, it is undoubtedly gamed by some in the middle group. I doubt you have any insight as to the extent however those in Treasury looking into this just might and it is them who will continue to finesse and reform the system. You might have noticed the Government is not keen to advance the recommendations of the last review any time soon because of electoral consequences.

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      Farside, I’m not ‘attacking’ anyone. But I’m heartily sick of you and others justifying a system that is seriously unfair and hurtful and continually arguing that those it discriminates against should just ‘spend their capital’. Apparently you don’t have the capacity to comprehend that spending capital too early in retirement puts people in jeopardy. Some of us want the right to choose how and when we spend.

      The system IS gamed, and it’s made wide open for gaming. It indulges the person who gifts to kids before retirement or buys a mansion or trips around the world, but don’t you dare decide you’d like a boat or a caravan to enjoy in your 70s. And definitely don’t expect to retain savings for expensive dental surgery in your 80s. That’s not acceptable unless you are in the very wealthy group. If you have only modest savings, you will be dictated to and forced to spend your capital way too early, and if you object, you will be nastily told you ‘choose to live in penury’ and have no cause for complaint.

      It’s YOU attacking people who don’t wish to spend their capital too soon, insisting that their inadequate income is fair punishment for want to plan and time their spending and that people who plan and time differently – or don’t plan and time at all – are entitled to reward. It’s you attacking, with nasty jibes about ‘living in penury’.

      I don’t doubt Treasury is looking for more ways to cripple savers. They won’t ‘reform’ anything. They will make it crueller and more unfair. The Greens and Labor will demand it and we no longer have a right-wing party to resist the wrongs. The left wing insists that everyone except the very rich must be equally poor, and sadly the LNP has conceded to that wrongful thinking.

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      oh dear, how sad, never mind Youngagain. If the IPA driven LNP is not right enough for you … well, it explains a lot about your worldly outlook. I am not attacking anybody or defending the system. The cards have been dealt, we may wish they were different but at the end of the day each of us make our choices according to the hand we have been dealt and bear the consequences of our choices whether we like them or not. You clearly are unhappy with the choices others have made for themselves, but if they are comfortable with their choices then all good.

      Spending down retirement savings is recognised to be an anxious task. Try the rule of thumb suggested by Actuaries Institute President, Nicolette Rubinsztein. She says “The reality is that many people can have a better retirement if they have higher confidence that they are able to draw down a little bit more of their savings than the minimum required by the government. Many retirees draw a bare minimum from their account-based pensions, or their savings, after they stop work. They can’t afford to pay for professional advice from a planner, and they live frugal lives because they fear outliving their savings. But the ‘rule of thumb’ is simple and accurate and takes into consideration a retiree’s asset base and age.”

      https://www.actuaries.asn.au/Library/MediaRelease/2019/ActuariesInstituteRuleofThumb071119.pdf

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    I don’t agree with this article for a number of reasons. The threshold of $300,000 to be eligible for a full age pension is incorrect as there are different amounts depending on whether a pensioner is single, in a relationship or if a home is owned or rented. The figure quoted of losing $78 per $1000 of assets, although technically correct is misleading. That is annualised whereas the bulk of the article deals with fortnightly payments which means losing $3 per $1000 of assets fortnightly.

    If we look at a couple who own their home and have less than $394,500 in assets (excluding the family home) they are eligible for a full age pension. Of the assets, if we look at super as being $300,000 of those assets the normal drawdown of 5% allows a return of $15,000 per annum. Add the age pension of just over $37,000 per annum and there is about $1,000 per week available to the age pensioner. This equates to someone working who will need to earn about $65,000 per annum before tax and considering all of the discounts and benefits accorded an age pensioner is quite a satisfactory income and well above the poverty line.

    I understand that this is an example which will not apply to everybody just as the article is also not applicable to everybody but it does show that it helps to have some funds in super to support the age pension. None of us has the same situation as others, all of us are different but to suggest that all funds should be spent prior to retirement is not helpful. Remember, if people are ineligible for an age pension because of assets then they can spend the cash component and, if necessary, sell some assets to enable eligibility for an age pension.

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      You miss the point of the article, Horace Cope. The point is that the pensioner couple is doing just fine with his $300,000 in assets and a pension. It’s the struggle self-funded retiree couple who saved $900,000 and gets NO PENSION, but only has maybe $36,000 a year – with ZERO concessions and benefits – who is being dealt with unfairly. If they draw down on their super at the rate of $20,000 a year to match the pensioner income, they are effectively gifting $16000 a year to the taxpayer and getting no benefit from it. Every year, their income reduces because their is less super invested, while the pensioner couple sees their income increase twice annually.

      The problem with this system is that it encourages people to save less. Instead of caring for aging parents, the soon-to-retire couple is urged to dump their folks in aged care at Govt cost and take an expensive trip, because they will be better off and get the full benefit of their saving. Or they are urged to buy a more expensive house so that they, instead of the taxpayer, get some benefit from their extra saving.

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    To answer the question.
    Are you confident the taper rate will be part of the government’s review? No.
    The new taper was orchestrated by Scott Morrison who was the then Social Services Minister. The 2017 changes to the Pensioner Assets Test was implemented under the guise of a budget emergency. These changes should have been grandfathered the same as those pre 2004 politicians who had their pensions grandfathered.
    Broken election promises, stolen assets, never trust politicians.

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    Mad as Hell you are correct it was Joe Hockey’s blunder and what a mess it caused and set the once good super system into to decline from which it will never recover.

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      Floss, it was not a blunder on Fat Cat Hockey’s behalf, it was a deliberate kick in the teeth for 93,000 part pensioners who lost their entitlement and a further 374,000 part pensioners who lost some of their pension. The flow on effect for those who were going to retire after 01/012017 is continuing today and evermore.

      In discussions with our local Federal Member (AsstTreasurer) before the last election he agreed that the change in asset limit was a hasty and perhaps poor decision. However he did not go so far as to say the limit should be changed back to the prior limit.

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      It was changed to $78 to encourage the spending of assets to help the economy gather pace, and to hell with the problems years away when more people would be on the pension.

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    At this Point In Time there is Absolutely No Rules On How To Use Your Super/Savings.
    The only Requirement For OAP/age there is Asset Means Test if claiming.
    Retire before OAP age “Whatever that is, which way is the wind blowing” use your super/savings up to comply with The OAP asset tests.
    Some buy their Dream Home, Prepaid Holidays (No Gilt Trippers) just follow the Great Examples of How to Play the System by our Politicians. No “Leaners” amongst them only “Lifters”.

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    I retired with $250,000 in 1992, immediately disposed of $50,000 to repay house, car loan and take an overseas trip. (GFC later took care of another $50,000.) Initially went on disability pension until 65, then age pension. My wife received $80,000 super when she retired. Our funds were combined and total transferred from super into annuity which has been progressively depleted since (replacement cars and holidays) and now has about $55,000 remaining capital. All in all, it’s worked out quite well for us as we still receive full pension and all other pensioner discount perks.

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