‘I feel very sorry for retirees at the moment’: former treasurer

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Former federal treasurer Peter Costello believes compulsory super has failed Australians, pointing out major flaws in the system and the need for reform in the sector.

Speaking at the Citi annual investment conference, Mr Costello claimed that the major mistake of compulsory super was the focus on accumulation, but when it came to decumulation “there wasn’t a lot of thought given to how it would be managed once it was in these funds and how it would come out”.

He also pointed out the shortfalls of fund structure after nearly 30 years of use.

“We realise [now] that fees were extraordinarily high, some of the products were no good, and at the end of all this, when you get your entitlement, there’s still this huge gap as to ‘what do I do now?’” he said.

“You’re at that stage of your life where you are trying to wind down and you don’t really know what to do with it, and I think this is where we’ve failed Australians.

“We haven’t had the right exit products; we haven’t had the ability to move between funds as easily as we should have, and we haven’t had fees as low as they should be.”

With low interest rates also negatively affecting many retirees, the nation’s longest-serving treasurer said it was time the Government reconsidered deeming rates, saying “he feels very sorry for retirees at the moment”.

“Everyone would say to you [that] a retiree should have most of their wealth in liquid assets – particularly in cash – and they get no return,” he said.

“I think this is where cuts in interest rates actually have a negative effect; they have a negative effect on these people.

“Borrowers save two for every one that savers lose on a rate cut, so overall a rate cut is effective for the economy.

“That’s if there’s immediate pass through and full pass through, and we’re now seeing rates are so low that you don’t get that.

“I think for those people, they’re starting to squeal.

“Deeming rates are very high and they don’t really reflect what the retirees are able to get. But, you tell me where you can get those sorts of rates any more? I think [the Government] has to have a look at that.

“It’s very hard for those people,” he concluded.

Do you agree with Mr Costello’s opinion? Are you finding it difficult to live a comfortable retirement at the moment? Should the Government revisit deeming rates?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?



Total Comments: 91
  1. 0

    Retirement funds are like politics, neither delivers the benefits claimed for the consumer. Fund managers get wealthy on our money and politicians grow power and influence for themselves without worrying much for the future of the country or its citizens. What’s changed? Nothing. What will change? nothing, again. Costello is no different from the rest of his political tribe – I wish I had one tenth of his income from the public purse.,

  2. 0

    I think the fund managers and government and other commercial interests see the superannuation as a golden honey pot to plunder.

  3. 0

    I agree with most of what Costello has said. His points about fees, portability and products such as insurance are well made. As to the decumulation phase, I tend to disagree with his thoughts about the need to do something. The funds belong to the employee, nobody else, and the employee should have the right to do with those funds as they wish. All of us are different and there will be innumerable reasons for the way the super funds are used on retirement. Some will be debt free and want to buy an annuity, some will choose to leave the funds with their super fund and accept the minimum 5% drawdown, some will wish to repay mortgages or other debts, some will do the big circle around Australia, some will want to travel overseas and the list is endless.

    There are people who can handle money and those who can’t and that ability, or inability, will also dictate how the super funds are utilised. There will be homeowners, those who rent, those who wish to self manage and those content to leave it all to their super fund. Suffice to say that all of the differences should not be rounded up and a government edict made to tell any of us what we can do with our own money. Remember, some of those super funds were placed there in lieu of a wage rise.

    • 0

      The whole premise of superannuation is to fund retirement whether in its entirety or in part.
      The problem is many people do not want to do that. They have other plans, such as leaving it to their offspring, upgrading homes (to hide funds and get the pension) etc.

      So why not make it mandatory that say 50% is transferred to an income/pension generating product, 30% left as accumulation funds and 20% which could be withdrawn as a lump sum and spent on paying out a mortgage, round the world trip, the grandkids education or anything else the account holder wishes?

    • 0

      Good comments, Horace, agree with all, except that you haven’t noticed that Costello (being a Liberal) has failed to mention the role of the nasty Assets Test changes of 2017 by his fellow Liberals as causing massive pain to people who had already retired or were close to retiring. While not acknowledged, his comment “You’re at that stage of your life where you are trying to wind down and you don’t really know what to do with it, and I think this is where we’ve failed Australians.” applies very much to the people badly hit by the Asset Test changes. Libs badly failed part-pensioners with that change.

      Complete garbage from KSS, Super is earned salary – not the business of Govt to tell you what to do with it, I thought Horace had explained this fully. Any attempt to touch it will be stealing – could lead to riots! Age Pension is what the Govt controls funded by taxation of 7.5% included in everyone’s individual income taxes plus other revenue.

    • 0

      What nonsense, KSS – most people, those who have a job – are tied into a compulsory superannuation system, and hardly have the wherewithal to start ‘salary sacrificing’, organising lump sums into super funding, and so forth – those kinds of privileges are reserved for the ‘better’ types in society…

      The ones who either are fat cats overpaid and work for government, or who live off their ‘work’ and get most of it off their taxable income….

      “I can always tell a man who works for a living – he says he on wages. If he says he’s on salary – he doesn’t work.” Ken Bruen

    • 0

      Comments like those from TREBOR and GeorgeM are the very reason why super should be quarantined for retirement. Regardless of what happened in the past, the fact is the purpose of super is to support one’s retirement. To that end, there needs to be some sort of restrictions in place to prevent those unable to see beyond tomorrow from withdrawing the lot and blowing it only to expect to rely on the pension.

      We now have 30 years of compulsory super. In around 15-20 years there will be people who have had compulsory super for their entire working lives. I am not one of them and have just a very few years left before becoming eligible to apply for a pension. And I still think that at least the lion’s share of super must be preserved for funding retirement as it was intended. By all means have some for fun money, but not the lot.

    • 0

      No one should be able to access superanuation. It is there for one purpose. To fund retirement.

    • 0

      Ah – so now you accept that superannuation should be quarantined, as I’ve been advocating all along over your arguments to the contrary.

      I love the way you seem to suddenly arrive on the side of the angels, but still retain your demons – the very ones who’ve given you your lead.

      Jeez – this reminds me of when the ex and I had the property – and our excess produce went to the poor in town… and OG/Bonnie suddenly started this thing of his/her excess produce to the poor in town – they who did not have NBN while Bonnie did.. those bloody peasants down there in the lowlands …

      You sure you’re not just a clone of OG and VCBB and Bonnie? (gotcha – deny it now forever – I used to monitor transmissions for the Guv amongst other things … and you’re so easy)….

      Personally – I’m satisfied that finally sense is coming into this issue – along the very lines I’ve argued for ages now…. and with which you now agree, though churlishly and still seeking to put down those who said it first…….

      By all means – insulate it from the grasping hands of politicians and their mates in ‘business’ …. and abolish the ‘private business model’ that costs to terribly much – and reserve it exclusively for retirement…

      I can now rest easy knowing that I’ve actually penetrated the thick hide of government and its lackeys, and taught them sense … pure and simple sense…

      thank you for your support ….

    • 0

      Get over yourself TREBOR. Even a cursory glance at previous posts of mine on super, would show you that I am no convert of yours. I have always maintained that super should be used for one purpose and that is funding retirement as it was instigated to do. I do not agree with living in penury simply to leave it to the kids or grandkids. If that means quarantining the funds into an income producing product then so be it. Much like the welfare card really: keep most for what it is intended to pay for and have a little left over for ‘ fun’.

    • 0

      I agree that Super should be mainly meant for supplementing Age Pension to have a better life in retirement, however it is NOT the job of Govt to control or tell people what to do with THEIR MONEY (in Super or elsewhere), and only an extreme right-wing nut-job would suggest to “quarantine” it and have the Govt control how people spend THEIR OWN MONEY in Super. Thankfully, such nut-jobs will never get their way in this democratic society.
      Of course, the concessional level of Super-based benefits must be far more severely capped than it is now as it is still too generous and being exploited by the rich.

      On the other hand the “entitled” people such as politicians on large, undeserved, Special Defined-Benefit Pensions (such as the pre-2004 MPs) MUST have these pensions scrapped. They should only get pensions, if eligible as anyone else by the same rules. Time to fix this urgently if politicians are to have any credibility. At the same time, Costello’s Future Fund needs to be rolled back into Consolidated Revenue or it should be used to fund Universal Age Pension for ALL with NO tests except Age and Residency instead.

  4. 0

    Costello you and Joe Hockey caused the problem just get your party to fix it ,simple really.I very much doubt you party know the meaning of the word sorry.

    • 0

      Oh dear, what problem do you think they have caused floss? The compulsory super was designed by Keating who, the last time I checked, was in the Labor Party. Costello left politics in 2009 so how has he contributed to any legislation since then?

    • 0

      You reckon this slowly developing train wreck wasn’t happening up to and including 2009?

      They all bear responsibility for the failure of the ‘business model’ of superannuation.. and only a massive resumption and revamping will save the issue of retirement packaging for the nation as a whole…

    • 0

      Thanks TREBOR, like floss your comment is heavy on rhetoric and light on detail.

    • 0

      Why don’t people just fix it themselves by having their own SMSF instead?

    • 0

      simple answer Old Geezer (VCBB). A SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself. SMSFs can have up to four members. All members must be trustees (or directors, if there is a corporate trustee) and are responsible for decisions made about the fund and compliance with relevant laws.
      So the first to letters say it all, Self Managed. Most people would rather have a life & do other things like travel, bowls, gardening, cooking etc than worry about Self Managing a fund which not only takes time but expertise & is also accountable to the ATO with strict rules etc & penalties if you get it wrong even unintentionally
      So OG you can now climb down from your high (rocking) horse as SMSF are only for a very small percentage of the population.

    • 0

      It was Costello who recognised that retirees were going to be in big trouble. He offered very attractive incentives to invest more in Superannuation.

      Keating didn’t have a crystal ball and no one really thought interest rates would grind to a rate this low.

      However we know now – so fix it before our children can’t ever retire!

    • 0

      Have to agree with Horace – Keating designed the screwed-up Super system benefitting the rich the most, plus the nasty Assets Test, as well as the disgusting Deeming Income test – a trifecta! Before Wayne Swan came along and increased the Pension Age to 67!
      Of course, with no one batting for the Retirees, along came the Libs (Abbott, Hockey, Turnbull & Morrison) who hit the part-pensioners for six with the 2017 Assets Test changes with NO grandfathering!

      Just setting the perspective right! No hope from either of these enemies of Retirees – Labor or Liberal. Retirees missed yet another opportunity to kick out all current MPs at the last election, although good that they kept the destructive Labor mob out.

    • 0

      You mean that over the years of Howard’s Way, with Costello stealing the Future Fund, and then most years under the LNP – they didn’t contribute to this slow moving train wreck?


      Keating 1990-1996.
      Howard 1996 – 2007.
      Rudd/Gillard 2007 – 2013
      Abbott/Turnbull/Morrison 2013 – 2019

      12 years of Labor since 1990, 19 years of LNP ……

      When is the Coalition going to start to repair this ‘problem’ created by Keating.. a ‘
      problem’ that, BTW, has only had half a ‘lifetime’ to evolve…. and which will not bear real fruit until it has ‘lived for fifty years or so … by which time everyone in a steady job now should have a heap of super….

    • 0

      Most people don’t have the opportunity to start a SMSF….. sorry about that reality intruding during your Black Panther Party..

      Get out and meet some real people for a change….

    • 0

      Some facts are so self-evident they don’t need a full explanation except to the unknowing and those who choose not to know… fear not – we’ll bring your education along slowly… though the work is hard …

  5. 0

    In other words you and your Government are a failure Costello.

    • 0

      So where does that put Gillard and Rudd, Swan etc?

    • 0

      floss and where is the last shadow treasurer and Conroy and his mate James , the shadow finace spokesman and not forgetting Shorten with their $337 BILLION tax hikes ,franking credit refunds cancelled and negative gearing closure , thank God we stopped them and their Green mates and militant unions stuffing this country

    • 0

      Where are these $337 Bn tax hikes?

      Please explain? Not going over franking fraud with you again…. negative gearing needs to be properly re-done… and CGT and NG should balance one another out – not cop both.

      Many things about tax laws need to be fully re-vamped to link up with the 20th Century – then we can start on the 21st… plenty of money out there to be recouped with a proper rendering of tax liability on those who are currently skating away with the loot…

    • 0

      TREBOR Short memory you have . Shorten and Conroy splashed their plan constantly to raise $337 Billion taxes over the last election campaign . Labor and their socialists who follwed them thought it was a great idea to tax everyone shitless . Of course they couldnt tax pensioners so they flog self employed and self funded Sounds like you are one who thought it was a great idea

    • 0

      So lay it out for us, fred…


      I take it you’re one of ‘the top 20%’, fred?

      ““Franking credits benefit households in the top 20% of income and wealth distribution considerably more than other households,” the analysis says. “While these households often have low taxable incomes, they tend to have large wealth balances or be in households with high incomes, even when the individual affected has a low income.”

      You beginning to see the problem here, fred? Thosetest with the mostest are getting the free-est ride…

      No wonder there is a dire need for overhaul of tax laws – properly – not the Howard way…

      Let me highlight it for you, fred:-

      “While these households often have low taxable incomes, they tend to have large wealth balances or be in households with high incomes”

  6. 0

    Survivor guilt? Who’d ‘ve thunk it in a politician….


    Nothing that he discusses will ever affect him, and by osmosis, his descendants – he enjoys his overly fat parliamentary ‘pension’, plus several other lucrative strands of income.

    He should have been considering these thing when he was our paid servant ….

    • 0

      No just a very clever man saying how it is. He knew it at the time which is why he offered so many incentives to invest in superannuation.

    • 0

      Probably it is guilt when he looks at the massive amount of money in the Future Fund he is managing for fellow politicians! NAH, more likely he wants to expand it with another bucket of money for all retirees which he thinks he can manage better than the Super companies! He has his eye on the Trillions there!

    • 0

      OH? And how many of those peasants had the extra to ‘invest’ in superannuation, over and above what they were paying automatically?

      Yes, Geroge – they all have their eyes on that stash of cash just waiting to be ‘absorbed’ into consolidated revenue – would solve all their budget problems for about five minutes – before the rampant inflation and massive cost hikes kill us all and leave us with nothing again.

      Like ‘privatisation’ reaping billions for governments – that money vanishes with hardly a ripple of result… for one simple reason – most of it disappears into ‘administrative costs’ and fancy dressing for old party and ‘business’ mates…

    • 0

      Oh and BTW – that will NOT include their own personal super fund or those ‘private’ funds that benefit their mates so very well…

      Only the funds of the peasants will be absorbed…

      You with me yet?

  7. 0

    For you information HC . Labor is not in power it is for the Libs to fix,it just will not happen.The Libs only know one thing blame Labor,why can’t they just govern for all Australians and not just for the big end of town.O.G YOU HAVE NO IDEA.

  8. 0

    On the other hand, if you have a few dollars in your super, that inflates your assets an the govt, thanks to ex treasurer Hockey, pinches 3 out of 1 thousand dollars from your pension which means that you would be better off not having super and then you would be entitled to a FULL super. This is a total oxy-moron, typical of greedy treasurers, politicians and self-proclaimed financial gurus who have no idea what it means to live on a pension and to always be afraid of new and “innovative” pension reforms which aim at taking money away from pensioners instead of helping them.

    • 0

      It makes you wonder what grandiose plans the government has for the poor old pensioner next. Lets hope the asset test doesn’t get cut back from around the $390,000 mark for a full couple’s pension or even more people will be doing it tough. It’s so easy for the pollies, with their snouts in the trough, to make cut backs that really hurt the people who can’t change their financial position due to old age.

  9. 0

    Super never would have funded my retirement anyway, I had not been paying into it for long enough, being born post WW2. I have had to rely solely on the Age Pension after I cashed in my super of about $12,000 to pay my solicitors fees following a drawn out divorce settlement. I now rely solely on the Age Pension. It’s OK if you don’t have a mortgage or have to rent on the open market. But there is no discretionary money left after basic living expenses are met. Thank goodness for it though……….

  10. 0

    Oh how we need Costello back as the Treasury, he did a great job. Deeming rates are a joke and do no tf reflect reality, giving no benefits to superannuees. The punitive nature of pension and super on those with small amounts is extreme.

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