Super is meant for your retirement, not your offspring: review

Font Size:

“Superannuation is intended to fund living standards of retirees, not to accumulate wealth to pass to future generations.”

So says the recently released Retirement Income Review (RIR), the document intended to guide government policy about our futures.

The review noted the “significant size” of inheritances in the superannuation system and that most people die with most of the wealth they had when they retired, reports accountantsdaily.com.au.

“They are not distributed equally and increase inequity within the generation that receives the bequests,” the report stated.

“If this does not change, as the superannuation system matures, superannuation balances will be larger when people die, as will inheritances. Superannuation is intended to fund living standards of retirees, not to accumulate wealth to pass to future generations.”

Liberal backbencher Senator Andrew Bragg told the ABC the entire system needed to be looked at.

“It’s not there for wealth transfers through generations, it’s there as a retirement income system.”

This is not music to the ears of 72 per cent of the 4315 respondents to YourLifeChoices’ Retirement Matters survey, who said they were intending to leave an inheritance. Of these generous souls, 95.7 per cent said their inheritance plans were not having a negative impact on their retirement plans.

The YourLifeChoices Insights survey highlighted the complexity of juggling retirement income and longevity expectations. It revealed that 75 per cent of respondents spend less today in anticipation of “large, unexpected expenses in the future”.

This might be wise, given the government’s wavering commitment to a legislated increase in the superannuation guarantee levy. Geoff Maurice of Nine News claims Treasurer Josh Frydenberg is about to “pick our pockets”, and we won’t know for years that we’ve been fleeced.

Mr Maurice believes Mr Frydenberg is laying the groundwork to scrap the legislated superannuation guarantee increase that is due to take effect next July, using the recession as an excuse.

“The argument that a rise in future income is unjustified because of the current crisis is all well and good, if the future income cut is meet with an equivalent pay rise right now,” he said.

“There’s a very obvious case to be made that a general rise in wage rates will stimulate the economy and help pull the economy out of recession. But, unsurprisingly, those arguing to scrap the rise in the superannuation guarantee levy are not proposing any such compensation.”

The RIR found that tax concessions in the retirement income system increase inequity and favour the wealthy.

Before the pandemic, 11,000 high-income Australians had superannuation balances of more than $5 million and they received annual tax concessions of $70,000.

“Given the Australian population was ageing, birth rates have fallen, and the ratio of working-age people relative to retirees was decreasing, over time these tax breaks would outweigh the savings achieved by people not relying on the Age Pension,” reports ABC News, calling super for the affluent a “wealth accumulation tool”.

“The cost of superannuation tax concessions is projected to grow as a proportion of GDP and exceed that of Age Pension expenditure by about 2050.”

The review also asks if rules should be changed so that a retiree’s principal residence is assessed as part of the Age Pension assets test.

“This would help equate the treatment of homeowners and renters,” it said.

“If the home were included in the assets test, some homeowners would no longer be eligible for the Age Pension. Others would receive less Age Pension.”

It asked whether retirees should be encouraged to use the equity in their home to support their standard of living in retirement.

“The options available to do so include reverse mortgages, equity release schemes, home equity loans and downsizing,” it said.

ACOSS chief executive Cassandra Goldie says “mounting inequality” in the system needed fixing and suggested the federal government increase the super guarantee to 10 per cent but reconsider any further increases.

She said the 15 per cent tax on employer superannuation contributions meant that “people on high incomes benefit greatly from generous superannuation tax concessions, at a cost of tens of billions per year to the federal budget”.

CPA Australia general manager of external affairs Dr Jane Rennie says a significant cohort of Australians is not achieving an “adequate retirement income” and that it’s arguably going backwards.

“The adequacy of retirement incomes has been slipping in Australia in recent years,” she said. “Some demographics are increasingly vulnerable, such as older single women who are the fastest growing cohort of homeless in Australia today.”

Which aspects of the Retirement Income Review most concern you? What changes to the retirement income system would be most beneficial to Australia?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

The costs that are crippling many Australians

Medical and hospital costs almost treble over 20 years.

Boosting confidence in retirement

Do you know how much you can ‘safely' spend in retirement? Accurium (part of the Chal

How does Australia's retirement system stack up?

The OECD has released a report comparing retirement systems and Australia isn't perform

Written by Will Brodie

76 Comments

Total Comments: 76
  1. 0
    0

    Would appear to be simple, any super left as an inheritance should be reduced by the amount of any tax concession when it was accumulated
    But the tax dodgers would find a way round it, so probably best to put a cap an concessions.

    • 0
      0

      Any super left will be taken into consolidated revenue……….in other words the govt gets your inheritance…..

      simples.

    • 0
      0

      and please a simple change of legislation is all it takes, hey have been stuffing around with super for years and the ultimate goal is your money…..

    • 0
      0

      What about an inheritance tax after the people pass away, happens in most other countries. It would encourage seniors to spend some of their assets. Inherited some money overseas and before any of it came my way the tax people had their fingers in it. We could do that here, say for estates worth above a million bucks. Won’t be popular but it would reduce the chances of getting a split society – kids with rich parents inherit heaps and others with poor folks get nothing.

    • 0
      0

      So RR any house that gets sold and the money passed on as inheritance should have some of the appreciation amount deducted by the government. Why not , it wasn’t money that was earnt.

    • 0
      0

      Panos, same. Any money accumulated from the increase in house prices and not taxed should go into consolidated revenue on death or in other words a death tax. Why not ??
      A very sticky subject which needs to consider all aspects of the equation.

    • 0
      0

      panos- “Any super left will be taken into consolidated revenue”…

      I say, BS!!!

      Employee’s superannuation funds are a sum total accumulation of a mandatory % of employee’s wages contributed by the employer plus any other contribution made by the employee.

      The super contributions you make before tax (concessional) are taxed at 15%. Types of before-tax contributions include: employer contributions, such as compulsory employer contributions and salary sacrifice payments made to your super fund. contributions that you are allowed as an income tax deduction.

      Your stupid, thoughtless statement that the government STEAL back the income earned by workers makes blood boil !!!

      HANDS OFF !!! You greedy hyenas. You despicable pirates!

    • 0
      0

      Arvo a stroke of the pen and it’s gone….

      Everyone can whinge and whine…..but eventually it will happen…..

      So spend up…………….

    • 0
      0

      The reality is the people who get the generous concessions are the wealthy who leave their money to family through trusts which avoid any taxes.

      Take away the concessions for the wealthy and let them put what they want in super, but without the government handouts, that they don’t need.

      Then put the money into the bulk of pensioners who need it and those that live below the poverty line.

    • 0
      0

      Oh yes OzJames70, I forgot about the so called FAMILY TRUST a Politicians favourite tool as well as a few others for TAX minimisation..

      Should be banned completely as well as Self Managed Super

    • 0
      0

      There is no stroke of the pen panos, strong enough to face the political repercussions and consequences for another Superannuation Funds theft by the government, therefore, there will not be a stroke of the pen, it will not happen or…heads will roll.

    • 0
      0

      Mariner kids with poor folks will get nothing either way. Are you suggesting some of the wealthy kids hand over their inheritance to the poor kids?

    • 0
      0

      @KSS – in an inheritance tax in a way that would happen. The poor offspring won’t get any more but the wealthy ones won’t get the lot just by inheritance. Even now if you live on the east side of a capital city you are stamped poorer (apart from Perth where the west is more popular). Look at a clapboard house in Moonee Ponds and a house in Studley Park (Melbourne) inheritances are astronomical in difference and there is no equalizer like death duties in this country. Reward effort but not windfalls – otherwise “it’s born with a silver spoon” like we used to say way back. If we talk about progressive taxation we have to start taxing accumulated wealth passed on to the next generation duty free. Not many countries have that luxury.

    • 0
      0

      Agree wit Arvo, why should govt end up with what people work hard for when they already tax super when it’s paid in. And how is having super classed as being wealthy? Can only pay $25,000 in per year salary sacrifice anyway. Starting to wonder if the whole super idea was a bad one after all by all the ridiculous comments here!

    • 0
      0

      I’m certainly regretting having to put any of MY hard earned $ into super in the past now when it seems a lot of it only ends up in someone else’s hands (ie all the taxes & fees, charges,etc when you need to access it). And worse still we die before being able to access it to live on …why shouldn’t it go to loved ones when we die!

  2. 0
    0

    Well you SFR retirees had better start spending your capital

    The Govt sees your not spending up big, they have access to everything.

    They will take the big dip when you croak. and thats all

  3. 0
    0

    The RIR marketing of using home equity to fund retirement is another LNP con.

  4. 0
    0

    I am aware of some people manipulating the system to ensure their wealth is retained for their adult children. The favoured way, pushed by ‘estate planners, is to cash in the super and buy a high value house, greatly in excess of needs, to take advantage of the house exemption from the assets test. Can you imagine a pensioner couple living in a 5-bedroom (each with it’s own en-suite) mansion on a one hectare block with tennis court and under-cover swimming pool and still getting a full pension . That’s legal but still manipulation.

    • 0
      0

      And picking up a little largesse from the pension system. Even a few bucks can get you the pension card, can be worth thousands.

    • 0
      0

      The kids would appreciate that big house and should also give the pensioner couple an extra $500 a week spending money as well as coughing up for all the outgoings like rates and repairs; That is something some of my wealthier mates are enjoying (no problem if you can trust your off-spring).

    • 0
      0

      Yes it is a great way great to accumulate the family’s wealth in a tax free way too. Some also buy an expensive house leaving just enough assets tonqualufy for the full aged pension. You then not only have an income but an asset growing tax free.

      Unfortunately an inheritance tax is not the solution as it is not easy to sell lumpy assets to pay for it. The problem is the house being an exempt asset for the aged pension. You simply can’t have one couple in a $10 million house and another in a tiny house on a bush block and treat both equally.

    • 0
      0

      Willie – can not see the “lumpy asset” problem you mentioned. My parents property had to be sold to be divided among the children, then the inheritance tax came in before the cash was divided among the kids. (That was in Europe). The difference as you said is the asset exemption of the house in Australia. House acquisition overseas is different as well: all costs associated with the purchase and maintenance are tax deductible while you are paying it off as well as alterations and additions. But in the end capital gains apply when you sell. Also your own place is an asset and comes in under an asset tax provision which we do not have. However, every older person gets the pension in full but it is taxable as well. Learnt all about different systems recently after the passing of Mum.

  5. 0
    0

    It seems that this is another exercise to bash the rich although I’m yet to get a definition of “rich”. The spectre of including the family home as an asset has once more been discussed as it does every year around budget time when Treasury puts the idea forward as a means to save money by the government. Thankfully, successive governments have ignored the suggestion because legislating such a proposal could not work fairly. I must state that I am not rich by any definition nor will including the family home as an asset trouble me in the slightest.

    What troubles me most of all is the suggestion that private wealth is somehow a bad thing. The 11,000 people with high super balances is actually 0.04% of the population so somehow the 99.96% of the population will have legislation thrust upon us to fix a perceived problem. Throughout any articles in this forum about super, the loud and clear comment has been made that super is our money and because of that we should be allowed to use it (or not) as we see fit. Some will splash it against the wall, some will go without to leave it for their children but most of us will enjoy it in our well earned retirement. The comment that 95.7% of those who of those who wanted to leave an inheritance said their inheritance plans were not having a negative impact on their retirement plans says it all. Most retirees want enough to enjoy their retirement but want a little put aside for emergencies and if those emergencies don’t eventuate then their heirs and successors get it.

    • 0
      0

      but want a little put aside for emergencies

      That’s the trouble a little bit does not mean hundreds of thousands…. do you agree ???

    • 0
      0

      I wonder if you bother to read a post, panos. Did you not see the 99.96% of people are not in the so-called “rich” category? How do you arrive at the “hundreds of thousands”?

    • 0
      0

      Agree Horace, super is your money but given the generous tax concessions it attracts I suggest that the tax-paying community may like some say in how one uses it.
      I have known people to retire at 55 (when that was the preservation age) had a great ten years spending their super then lining up for the old age pension at age 65 (before it was changed to 67). I may have a distorted sense of ethics but that does not sound right to me, superannuation was to give one a better life in retirement, not a spending splurge before eligibility for the OAP.
      I am not opposed, per se, to including the family home in the assets test but there are so many ifs. buts, or maybes I am not sure how it could be fairly applied to cover all situations.
      As for inheritance, my kids will share my house, any cash I have left over will be an unintended bonus.

    • 0
      0

      I agree Eddy that super is to make retirement more comfortable, not to retire early to spend it all and draw the age pension and I’m sure that those who do that represent a very small minority. I am not opposed to our house being included as an asset either but I argue the case for those people in capital cities who, through no fault of their own, are paper millionaires because of a postcode. Those same people are living in a 3BR fibro home in what used to be a working class suburb, probably without much super, living off an age pension and paying high rates. I’m not sure that there is a person in the public service who could come up with a formula that will fairly allow for home values, state by state, city by city, suburb by suburb or large regional city by small country town. Our house moved three suburbs over would make us millionaires.

  6. 0
    0

    That makes sense Horace Cops. I would also want a definition of ‘rich’. Next year, when I’m 66 my husband and I will be entitled to a pension of $240 per fortnight between us. We will be over the limit for a full pension and under the limit for the cut-off. We consider ourselves comfortably off but certainly not rich. My children are unlikely to inherit anything and we didn’t inherit either (or just a small amount) but I wish there was more for them. People with vast wealth will always leave their children fortunes and the super system doesn’t affect them

    • 0
      0

      Flowerpot, without knowing when you will die, your kids WILL inherit something. If your pension is reduced to only $240 per f/n, you must have some valued assets. Or you’ve set you’re will up to strictly specify they get nothing.
      I just wish I knew my last day….i would ensure there was nothing left. Except debt!

  7. 0
    0

    I think it’s pretty simple to protect the tax advantages for the average person on superannuation by bringing in a special superannuation death tax for those using superannuation as a way of accumulating wealth, possibly for inheritance. On the demise of the said super holder, a death tax well in excess of the average tax, could be applied to any super account holding more than say $1 million / $1.5million dollars. In this way super would be used for what it was designed for, to look after yourself in retirement. Regards Jacka.

    • 0
      0

      Super was designed to allow a person to live a more comfortable life.Super belongs to the person and allows him to spend it how he or she like.It has nothing to do with what RIR think.Attempts to tweek the Super system are just continued meddling with a system that works but people continue to tug at the purse strings,hoping some money will fall their way.

    • 0
      0

      There already is a 15-17% ‘death tax’ on concessional super. With 15% in and another 15-17% out similar to PAYG. Many superannuated are not rich and hence many would consider a 30% taxed inheritance or be fair.

  8. 0
    0

    Easy. Just mandate a maximum amount that can be left in a Super fund on reaching 65. Any excess needs to be withdrawn. But the Superannuation Funds won’t like it!

    • 0
      0

      Ronin, that happens already and has been in for a few years. The limit is $1.6 million, anything above this needs to be transferred even after 65..

      Part of the problem is nothing to do with leaving an Inheritance, its knowing how long we are going to live and how much we will need in our later years. I don’t fancy trying to get a job in Bunnings when I’m 95 to make ends meet.

  9. 0
    0

    MORRISON keep you thoughts and hands of our super, tax has been paid on it many times .Just because your super is untouchable it should be same for ours.

  10. 0
    0

    Keep it up and most people will not bother with super much easier to take up a C/Link pension,It has got to this stage now.Super has lost its luster under this Liberal Government.

    • 0
      0

      Has lost its luster for me a long time ago when I lost a lot in the GFC 2008/9. Happy with the part pension – won’t be different with the ALP even though you are rusted on to it, floss. If you have stuff all – the ALP is the way to go!

Load More Comments

FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Age Pension

Important details on how your income stream information is updated

Updating Income Stream InformationHi everyone, I wanted to chat about income stream reviews and how they may affect your Age...

Uncategorized

Spinach and Parmesan Crustless Quiche

In The Midlife Method, food and lifestyle writer Sam Rice explores why it is so much harder to lose weight...

Entertainment

Jenny Eclair: 'Middle-aged women aren't invisible, they are just ignor

"I've had a lapse back into the menopause today," Jenny Eclair declares at the start of our interview. "I had...

Aged Care

Is your loved one in aged care during the pandemic? Here are seven ideas to make things easier if lockdown strikes again

Many families have faced the stress of having a loved one in aged care during this anxious time of COVID-19....

Health & Ageing

How The Midlife Method author keeps her health on track

In The Midlife Method, food and lifestyle writer Sam Rice explores why it is so much harder to lose weight...

Health

How to … tell if you're oversleeping and what to do

An adult needs between seven-and-a-half to nine hours of sleep each night. If you're consistently sleeping for longer than this...

Community

Hand in hand at London Zoo with a simian friend

YourLifeChoices' 91-year-old columnist Peter Leith recalls an encounter of the simian kind during a visit to London Zoo back in...

Podcast

Retirement Made Simple

In this interview with podcast host John Deeks, the 80-year-old offers pearls of wisdom on all matters retirement: the sea...

LOADING MORE ARTICLE...