The retirees being ‘overlooked’ in coronavirus packages

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Self-funded retirees have been ‘overlooked’ by the government’s coronavirus response measures, say industry experts.

“Self-funded retirees who do not receive a pension or part pension or the Commonwealth Seniors Health Card are suffering financial hardship due to the impact of the COVID-19 crisis with little or no support from the government,” says Association of Independent Retirees (AIR) president Wayne Strandquist.

He explained that with the introduction of compulsory superannuation in 1992, the government’s intent was to encourage more Australians to fund their own retirement and reduce reliance on the Age Pension. And the move has been successful, with YourLifeChoices’ 2020 Ensuring Financial Security in Retirement survey showing that 38 per cent of older Australians are self-funded couples or singles.

But with a self-funded retirement comes risk.

Mr Strandquist said: “This has meant that self-funded retirees must bear the full investment risks of their retirement savings in the share market, property and fixed interest instead of having an Age Pension funded by the government with no risk attached.”

John McCallum, National Seniors Australia (NSA) chief executive, told the Australian Financial Review (AFR) that “retirees are very anxious that there are not going to be self-funded retirees for much longer”.

Professor McCallum said many self-funded retirees are complaining that they feel “abandoned” by the government.

“There is a concern that their struggle to make ends meet is not being recognised,” he said.

Mr Strandquist said the coronavirus pandemic had had a serious financial impact on self-funded retirees in the following ways:

  • falls in the stock market have reduced the balances of most superannuation funds by up to 20 per cent, with younger retirees (60–75 years of age) having their retirement income streams reduced by up to 10 years
  • the drawdown of share investment capital will result in lower returns and potential capital losses
  • lower or no company dividends can be expected, such as already announced by leading share investments including the banks
  • investments made in companies that operate in the hospitality and tourist industries are at serious risk of not being recovered
  • reduced rental property income as many tenants have been stood down from work
  • the RBA cash rate has resulted in the fixed interest and bank interest rates being close to nil.

“All of this means that many self-funded retirees with assets above the Age Pension threshold are now receiving less income than the full Age Pension and do not qualify for the Commonwealth Seniors Health Card and the $750 income supplement,” said Mr Strandquist.

There has been a 50 per cent increase in calls to mortgage lender Household Capital from self-funded retirees since the pandemic outbreak, its chief executive Josh Funder told the AFR.

Olivia Long, managing director of self-managed superannuation funds at Prime Financial Group and ExpertSuper, called for action.

“I’d like to see Canberra repeat the precedent set during the global financial crisis and decrease minimum pension requirements. Give pensioners the opportunity to sit on their investments until market conditions (eventually) recover.”

Are you a self-funded retiree? Do you feel you have been overlooked in the assistance packages? What would help you?

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Written by Will Brodie

140 Comments

Total Comments: 140
  1. 0
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    Inequalities will persist for as long as we don’t have a Universal Basic Income.

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      Spot on, Dave R.

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      I agree, Spot On

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      However with a universal basic income we get the rest of the communist/socialist package…not a good idea; except for the uninformed and looney left. Be careful what you wish for…!

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      There is a huge gap between communist/socialist and a social democracy. Just about every other OECD country has a universal aged pension including the US.

      The communist China has no aged pension so I’m not sure what you think communist, socialism and just plain being fair to everyone for a change is about.

      I worked for 45 years, raised kids as a widow and am self funded without any welfare except that $900 from Rudd. Food costs and extra expenses due to cover 19 are not supported in my case. Not sure why I’m punished for a life of hard work and sensible saving.

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      You shouldn’t be, Rae. And Old Silver Fox is misinformed. A universal aged pension is not part of socialist or communist policy, but is a sensible, just and fair policy that recognizes and encourages responsible living and affords people the degree of comfort in retirement that they earned and deserved, whereas a stupid means tested pension rewards frivolous spending, laziness, irresponsible lifestyles, and manipulation and punishes those who do what’s best for the nation and future generations. Needs-based pension systems CREATE need, because they reward those who can create the impression of being needy and punish self-sufficiency. Communists and socialists don’t like self-sufficiency. That much is true. But they don’t support the genuinely needy very well either.

      BTW. Old Silver Fox, the ‘looney left’ (Greens and Labor) are responsible for harsh means testing of the OAP. They OPPOSED a universal pension.

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      Nah we couldn’t have a universal basic pension as those on welfare would whinge too much.

  2. 0
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    Yes I agree many self funders have been left behind. I am on full pension with a small super fund, I have lost 20%+ also.

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      Yes – in every aspect of our portfolios.
      However this will be over soon and we will all bounce back – fingers crossed.

      I really feel sorry for small businesses and young people with mortgages etc etc.
      The banks are only deferring loans. Interest is accruing.

      The sooner our Victorian Premier and Queensland Premier stop being so timid the sooner the economy will recover. If we don’t there will be nothing in the bank for the next disaster. As older citizens we must be responsible for ourselves.

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      A friend has lost half of her bank share portfolio and over two thirds of her dividend income. She’s off to see Centrelink. I suspect there are quite a few in the same situation now.

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      Yes Rae. I’m hearing many SFRs say that they are not too worried about losses because they would be better off with part pensions anyway! What a silly system!

  3. 0
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    Yep, Self Funded Retirees are discriminated against esp considering $2 million is needed in order to generate equivalent in aged pension. Also can YLC please remove georgewilson as it is a scam as well as being illiterate

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      Of course john, you overlook the fact that a couple with $2 million dollars could draw the equivalent of the pension every week for 32 years, without including any interest earned on the principle. Whereas the full pensioner couple without capital just has the pension.

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      Of course you could over look the fact that there are “pensioners” sitting in 2 million dollars plus homes as well which is not included in assets test and which will be a will be a wonderful gift to their children at some time in the future.

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      Yes, Sceptic and Hyperbole, and you COULD overlook the fact that the million+++ pensioners get to live on is TAXPAYER FUNDED, whereas the money SFRs have to live on is their own savings. Would you sacrifice holidays, nice clothes, a new car, restaurant dinners, etc. to GIFT $1 million+++ to the tax man?

      And I don’t think many SFRs are sitting in 2 million dollar homes. Lots are struggling with quite modest homes and less than $500,000 (per person) in assets, but still have to gift their savings to the tax man while pensioners get free handouts.

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      As a fully self funded retiree I am living in a unit worth $297K

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      How is taking a pension or part pension after paying taxes for 40 or 50 years different from accumulating wealth by using every tax minimisation perk available to businesses or high income earners including very superannuation concessions?

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      What tax minimisation? That’s nothing but a myth but welfare is real.

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      veepee, you make a lot of wild and totally unsubstantiated assumptions. I am a self-funded retiree, but I never earned a high income and certainly never used tax minimization ‘perks’. I didn’t even have superannuation until the last few years of my working life and my contributions were never enough to benefit from tax benefits. Actually, I’m noticing that most of those in my circle who earned high incomes and used tax minimization schemes ALSO manipulated to qualify for full aged pensions. They learned early in life how to work the system to line their pockets at other people’s expense and they continue to do ensure they get every cent on offer.

  4. 0
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    Canberra has put forward the same procedure of reducing the standard rate for superannuation drawdown by 50%. However that can also have adverse effects where a single person goes from a pension just covering the cost of living, to half of that. On top of that, the pension is based on the value at end of financial year, and value of investments in super has also dropped dramatically. So then you have to drawdown on savings, which generate virtually no interest, so expected finance streams are severly shortened.

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      That just means while pensioners are getting a temporary increase self funded retirees are reducing their allotted weekly pay as the unit share price has dropped. No winners for people in the self funded superannuation contributor funds.
      It appears a pandemic is a good time to work for or to be dependent on the government purse. No job losses, using up holiday leave and reduced hours for them.

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      Yes Rosret someone on Newstart commented how lucky they were to be already in the system even though just two months ago they were desperately searching for work.

  5. 0
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    Yes. I feel we are overlooked. We have done are best to be self funded retirees and even when a crisis like the Pandamic hits we are not provided with any assistance.

  6. 0
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    The system is designed to ensure that only retirees who need pension concessions get them. The parameters are very generous and retirees with millions in assets still get access to age pensions. Often much too generous. They are getting a little help from the government because mostly they will have to spend it and keep the wheels of the economy turning.

    The complainers are mostly well off retirees who want to preserve capital to pass down to their children. Why should tax payers subsidise your children’s inheritances when hundreds of thousands of hard working Australians never had jobs that gave them the luxury of generous superannuation? Do you want an extra $1700 to add to your capital? or to reduce your draw down? or to make a payment on a luxury cruise? If you are really a self-funded retiree you must already have a whacking great dollop of assets, including superannuation, and don’t need such a small amount. The government has halved to compulsory draw down rate so your capital is preserved through the crisis. Why are you whingeing instead of spending some extra capital to support the economy?

    Anyone who has superannuation and is not eligible for the age pension is free to either live more frugally and prioritise their kids’ inheritance, or reduce their capital over time to improve their standard of living. Your choice. Perhaps you could spend some on a good therapist to better manage your poverty fears. None of you are within cooee of real poverty such as experienced by the pensioners getting a little extra help from the government – to support the economy, not because the LNP is suddenly humane.

    Millions of people with superannuation will never have that choice because they will need to spend what small capital they have to supplement an age pension. Tough luck for their kids who get no inheritance, but probably didn’t expect one, and might even be resourceful enough to support themselves into adulthood.

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      That is a great argument for people paying back any age pension received as a debt when they die.

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      Ret. Well – you keep saying the same thing but you are against an inheritance/death tax. How do they repay without being forced to by a tax upon departure. You cannot reach into the coffin to pull the notes out as the funeral home will have gotten to them first. Just let us know how YOU would get the pension money back. I am sure the Govt would be more than a little interested.

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      “retirees with millions in assets still get access to age pensions”

      No they don’t. A single home owner with over $578,250 in assets can’t get an age pension.

      And I know people who are on the pension, but they shouldn’t be, because they gave their children their financial assets just before they reached age pension age. There are many pensioners who are much better off than self-funded retirees, and now they are getting these bonuses as well.

    • 0
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      Well put. As part pensioners we consider ourselves fortunate but we are also less gungho with our investments than those who have lost 20% of their super. The choose to forget how much they have made over the last few years with their money in high risk investments, which surely isn’t a wise strategy for retiree.

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      Travellers Joy, the system is deeply flawed, as it encourages and rewards irresponsible living and punishes harshly those who do what’s best for the nation and future generations. I can gamble and drink my money away and the taxpayer will hand me $1 million or more in retirement funding. But if I choose to live a little more frugally and invest to leave something to help my grandchildren get a better education, or to pay for my own aged care, I am deprived. That is NOT a good system. And no, people with millions do NOT get pensions. But pensioners get an average of $1 million handed to them from the taxpayer purse, while those who saved a million get kicked in the teeth and required to live on their savings until they run them down to about half.

      I get a rich reward for gambling and dining out, or taking expensive holidays before retiring, but if I am not so lucky and have to wait for retirement to buy that caravan and trip around Oz, I suffer deprivation. If I dump Mum in aged care and trip off around the world, I am rewarded, but if I give up my time to look after her in my own home and save the cost of that trip of a lifetime, I am punished. If I earn a fat salary, the taxpayer dumps huge amounts into my retirement kitty so I can retire in luxury, but if I am a battler I get sweet nothing, or next to nothing, to build my super and then am cheated out of a pension if I saved anyway. I am punished for putting money aside to pay for medical or dental care in later life, or to ensure I can repair my home and remain in it – with a carer if required – instead of going into aged care. But if I spend up frivolously, I can have taxpayer-funded medical and dental care and free aged care accommodation.

      Halving the drawdown rate does NOTHING to help a retiree struggling on returns well below the OAP level and not getting any concessions. They can’t afford to reduce their draw down rate. They would starve. So their only option is to cash their assets at a massive loss and spend the proceeds, then claim a pension. Anyone who thinks that is good for the nation has cotton wool between their ears!

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      Young again, I agree. Also, self-funded retirees have to pay more for essential services than pensioners. They don’t get cheap medicines, free rego and discounts off their utilities, phone and council rates. Nor do they get the energy supplement or bonuses that governments give out from time to time to pensioners.

      You’re exactly right when you say that those who do the right thing and plan and save for their retirement are punished. I know people who were on a higher income than me throughout their working life but never saved and are now on a pension, whereas I won’t be able to get one.

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      Mariner, no need to pay inheritance tax, no need to leave an inheritance to your kids. Keep it all, Morrison told us at the beginning of the virus that he was setting us up to be better off ‘on the other side.’ We know he’s got a proven record for miracles so get those arms swaying.

  7. 0
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    The minimum drawdown has been reduced.

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      That’s not a benefit. 🙂

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      Yes, it has, Ted. So struggling SFRs who had incomes of way less than the OAP, with NO concessions, are now very lucky. With reduced income from their investments and reduced asset values, they are allowed to try to live on $15,000 a year per couple instead of $30,000 so that they don’t have to sell so many assets. I wonder how you pensioners would respond to the government halving YOUR income?

  8. 0
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    That is definitely true! My husband & I are in this group – what I termed ‘The Grey Zone’ because there has just been no consideration given in this time of need. Whilst rent reduction will help renters, who is going to compensate the rent difference for those partially dependent on rental income for their retirement? Income from super is also being eroded – we are all well aware of it. It has got nothing to do with luxury cruises, inheritance for kids or having ‘a great dollop of assets’ – note that when we were working, we also paid a ‘great dollop’ of income taxes, worked long hours to keep companies going as part of our jobs. We only asked to be given ‘fair consideration’ in current circumstances. Just because we exceed the asset threshold test for govt. pension does not mean everyone is a millionaire. It is a statement of fact, not a whinge.

    • 0
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      I agree that the rent reduction for renters with no compensation for landlords is unfair, whether retired or not. Exemption from paying mortgage payments only increases the burden later on, and in any case owners have to spend all their savings before banks will consider that option.

  9. 0
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    The most disadvantaged retirees are those couples with $1 million as they have no chance today to earn enough to live on. These people need help now.

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      So what you are saying – if people didn’t save and have led the life of Riley then the government will help you but it you have saved, studied hard, worked long hours and been really cautious as you have done the future projection sums then its OK to have your portfolio drop by thousands of dollars?

      How much have you lost from this Pandemic so far?

      I don’t actually want anything from the Government but it does hit hard when people have salary sacrificed for years to draw down less than what the Government has allocated to those who haven’t.

      However, I would still rather be in my position than beholden on the Government coffers.

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      If I had a million bucks, I would upgrade my place, get everything new and qualify for a part pension. Or I would certainly not belly ache in these columns. Agreed, a million is not sufficient to self support unless you start eating into it, i.e. $40’000 per year. Enough for ca 20 years and then have nothing to leave behind. This “leaving money” is behind not wanting to spend the funds for most people.

    • 0
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      Rosret – it works the same with insurances, the people without house insurance and a burnt down house are on Current Affair wanting money or anyone else to pay for their misfortune but putting a few $100 in a year to protect themselves no way.

    • 0
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      The most disadvantaged retirees are those couples with $1 million

      My heart bleeds for you, you may have to crack that million to live for a while….

      oh gosh

    • 0
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      I certainly wouldn’t like to try and live on the return on $1 million today. Good luck to you if you can.

    • 0
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      Retiring Well, it’s pretty obvious why some people here DON’T have $1 million. No comprehension of economic reality!

  10. 0
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    Thank you for bringing this to your newsletter I only hope that the politicians read it and take notice.
    They were very keen to take our franking credits and cut the negative gearing Now that we have lost most of our dividends and getting very little on term deposits I presume they are rubbing there hands together especially labour and the despicable Greens. Us self-funded retires are finding it harder to survive than the pensioners we don’t get the concessions pensioners get we still pay full price for everything like rates rego licence ect ect .We are now living on less than the pensioners get and no thanks from the government for providing for our selves and saving the government millions

    • 0
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      You’d have to be a complete fool today to save for your retirement is the message now being sent. So only put what you have to into super and enjoy the rest of what you earn to the fullest.

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