Five Budget 2017 no-brainers for Sco-Mo

How Scott Morrison can help retirees in Budget 2017.

Five Budget 2017 no-brainers for Sco-Mo

With 3.5 million retirees and another 4 million 50 or 60-somethings set to join them over the next 10 years, it’s imperative for governments to ensure all these older Australians have a roof over their heads and an income robust enough to cover food, energy, household expenses and decent health care. Yet this is not the case for many retirees. And it’s surprising, given that we are talking about what will be nearly 25 per cent of Australia’s population by 2025, that this issue isn’t higher on policy agendas.

So Budget 2017 presents an opportunity for a visionary government to lay the foundations for effective economic policy that will ensure that retirees can better support themselves with legislation that works for all, not just a few.

Having recently surveyed the 250,000 strong YourLifeChoices database, receiving 6194 responses to 35 questions, we learned a lot about the six different retirement tribes and how they are managing their retirement affordability. Of most concern was the absolute importance of housing affordability and the tough life many couple and single renters lead, with 30 per cent of their income gone in rent before other essentials can be considered. Managing the changing rules of retirement income was the greatest challenge faced by our respondents, closely followed by covering health costs.

So taking into account the key findings from the YourLifeChoices 2017 Retirement Affordability Survey, here are the five no-brainer changes Treasurer Scott Morrison must make to ensure that retirement affordability is achievable for all Australians, regardless of their postcode. Unsurprisingly, these policy initiatives relate to housing affordability, health care costs, superannuation rules, and household expenses. Each is based on concerns expressed by our retirement community, that is, the people who know most about retirement and how it works.

Five Budget 2017 no-brainers:

  1. Make health care more affordable. These basic changes will benefit all Australians, and not just those in retirement. Until now our Medicare system has ensured most Australians receive high quality medical care, regardless of their financial situation. But it seems this is under threat, with Medicare suffering death by 1000 cuts. The Treasurer should leave Medicare alone, except to ensure that critical health tests, including MRIs, are claimable and refuse health insurer requests to increase premiums by more than CPI. And it’s not just making health care more affordable. Rather than focus on the Budget deficit and the cost of funding health, there needs to be a more equitable and sustainable model for our public health service.
     
  2. Stop changing rules on superannuation and the Age Pension. You heard right – just stop. We are told that the responsibility of our retirement income now rests with us, and that we need to be lifters, not leaners. So if our current government wants older Australians to put money into super to achieve this goal, it needs to stop with all the rule changes. Yes, super entitlements have unfairly advantaged the well-off, but what we desperately need is a comprehensive retirement income review, which considers the different imperatives of tax, welfare, super and the myriad of other concessions and rules, followed by one-off grandfathered adjustments. Then we need the legislation that the Labor Party previously proposed, but never brought into law, and that is for NO further changes to super guaranteed for five years. Which means the rest of us can just get on with the business of working and scrimping and saving, with a degree of security as to where the goal posts sit today and tomorrow.
     
  3. Help out renting retirees. While we are on the topic of retirement income, the base rate of the Age Pension remains too low, particularly for those who are renting. This 15 per cent of the retiree population is now going without medical care and food in order to cover rising housing costs. Rental assistance for retirees needs to be increased to ensure these people live with a reasonable measure of dignity. The current rate at which Rent Assistance is paid is far from reasonable given the annual increases, often greater than CPI, imposed by landlords. More affordable government-funded rental accommodation, i.e. social housing, is also required and this needs to be addressed urgently.

  4. Allow access to home equity without losing the Age Pension. Retiree homeowners must be allowed to use the equity in their homes to supplement their income. This one really is a no-brainer. So many older Australians are asset-rich but beyond cash-poor. Yet the Age Pension entitlement rules mean that any sale of a family home will probably increase their assessable assets to the point that they lose their main source of income. So they hang on grimly to the family home and scramble to make ends meet on a weekly basis. The answer is clear. Why not allow such retiree homeowners to downsize and commit the extra cash to a retirement annuity, which cannot be used for other purposes, but ensures that their pension entitlements are preserved? The happy by-product of this policy will be to free up housing stock for younger people keen to secure a larger family home. Win–win guaranteed.

  5. Bring on a Royal Commission into banks. It’s been talked about for years and it’s the one thing that would increase confidence and trust in Australia’s financial system. Yet despite ongoing evidence of banks behaving extremely badly, we cannot seem to find a government willing to shine a light on the much reported banking misdeeds in order to bring criminals to trial and clean up such poor culture and criminal practices. Governments simply cannot ask ordinary Australians to put their faith and retirement savings in a financial system that has been found wanting again and again and again. It’s like lancing a boil – just do it.

What do you think? Are these the policies you want to see in Budget 2017? If not, tell us what you hope Treasurer Morrison should be doing.

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    COMMENTS

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    Queensland Diva
    27th Apr 2017
    10:45am
    The government seems to be all for retirees selling their "large" family home so younger people can buy them. Why then would they not allow said retirees to use freed up money to live day-to-day. I truly abhor this government and it's attitude to retirees, unemployed and those who are not the financial elite of our country.
    Old Geezer
    27th Apr 2017
    11:04am
    That's why the house needs to be included in the assets test. Stop OAPs living in houses way too big for their needs and claiming the OAP.
    KSS
    27th Apr 2017
    1:33pm
    Queensland Diva, by selling up a large home and opting for a smaller one you are freeing up assets to live day by day. To quarantine this profit from any cut to any welfare (Pensions included) is just plain wrong. Yet again this suggestion goes to punish those who invested elsewhere but did not buy a property. They have their assets taken into account and so should any downsizers. The benefit should come from say lower sales costs or suspension of stamp duty for example, NOT by a continuance of welfare at the same level regardless of the actual assets they have gained by the sale.
    Old Geezer
    27th Apr 2017
    11:08am
    If you want better health care than Medicare then simply pay for it.

    Change is a part of life and rule changes will continue with super and OAP. Lots more needs to done.

    A Royal Commission into banks will do nothing other than makes the lawyers rich. People need to stop blaming others for their own mistakes and greed. Lose money due to your greed and rose coloured glasses then it is not acceptable to blame the bank.
    Rae
    27th Apr 2017
    3:57pm
    I do blame the banks for creating so much debt that asset prices are way overpriced on fundamentals, interest rates far too low and wages stagnant for the past 15 yeas as prices balloon way over CPI.

    I blame the government for lax immigration policy that now requires savers to pick up the pieces as they are the only ones with liquid assets and little debt.

    A right proper mess all starting with Keating/Hawke bloody Accord and Howard crazy plans to stuff a great country into poverty.

    The fiasco with Rudd/Gillard and Abbott/ Turnbull just keeps on and on with stupid policies.

    The sooner the whole thing falls down the faster it can be sorted out.
    Kaye Fallick
    27th Apr 2017
    4:16pm
    Hi Old Geezer - many people who have lost money to banks have not been greedy. they have been refused payouts on insurance policies when the banks have shirked their duties. there are other instances of bank financial advisers forging customers signatures. this is hardly greed? cheers, Kaye
    Anonymous
    27th Apr 2017
    4:27pm
    OG is the master of judgment and blame, and has no capacity at all for empathy, nor understanding that many people suffer misfortune through no fault of their own. Greed and selfishness is responsible for a lot of hurt, but generally NOT hurt to the greedy and selfish but rather to the innocent victims of the greed and selfishness of others.
    Charlie
    27th Apr 2017
    11:19am
    I agree with the one on rental assistance. Lets not make the retirement flat for a pensioner a tiny "bed sitter" with no air conditioner, or no insulation in the roof which makes the air conditioner too expensive to run.

    One benefit I think they've missed is to loosen up the job market so a person can get a half day work. I cant work a full day, but I can go fairly well over 4 hrs. The pension leaves so little cash left over. If there was 4hrs paid work per week it would make a huge difference to my standard of living. I would trade my uni degree for a fork lift license any day to get some casual work.

    Government concessions for communications don't hit the mark. Either they don't exist anymore or they are not worth having. Its no longer a matter of a telephone, because NBN can put the telephone through the internet modem, also the bundles and packages being offered to the public are not within the price range of the live alone age pensioner. Things like email, facebook, U-tube are wonderful for pensioners who are housebound with chronic illness and have the skills to use these services, if only there was a decent concession to make them affordable.
    Kathleen
    27th Apr 2017
    11:49am
    People have not picked up on the fact that government keeps reducing the government contribution. Over 70s were getting 40% towards their private health cover and now it is less than 35% and will continue to be eroded.
    Also, there should be means testing on public hospitals. Very wealthy people are using the public system although not blinking an eyelid at paying massive amounts for other things.
    I spent half a day in local ER and was able to use my private health to contribute towards the cost which I was very happy to do. A similar thing needs to apply to wealthy people.
    As far as a pensioner's home is concerned it is not the fault of the pensioner that house prices have sky rocketed so leave them alone and address the actual causes. People have the right to choose where they live and no one should force them to sell or move or leave their home which they paid a modest amount for ten, twenty, thirty or more years ago.
    We paid $34000 for our home 11 years ago and it has nearly doubled in value. Not our fault or choice! We would gladly have its value to be closer to an acceptable amount.
    The government needs to look at itself to solve problems that they have caused. The gas issue is a good case in point.
    Rae
    27th Apr 2017
    4:05pm
    The government has known about the gas issue for over a decade. They have also known how many retirees there would be since we were born. They knew how many 35 to 40 year olds were coming in as immigrants since Howard upped the numbers.

    The car makers knew that energy prices would be unaffordable. we are subsidising Chinese business and Japanese business and foreign businesses but not our own.

    The LNP/IPA hatred of unions and attacks on anything to do with unions or unionists is pure spite and bloody mindedness in my opinion.

    There should never have been two health systems. One sensibly funded public system would have been more efficient and cheaper.
    Chrissy L
    27th Apr 2017
    12:42pm
    I agree with all the points listed in your article but I doubt if this Coalition Government will listen. It is not in their DNA and never will be. They are only interested in the wealthy and always will be. I had hope that Turnbull would be a fairer leader than Abbot but not the case. The right wing of the Coalition has him dancing to their orders. The only message they will understand is Opposition. Kick them out at the next election!

    27th Apr 2017
    1:01pm
    Kaye, your Item No. 4 (Allow access to home equity without losing the Age Pension) contradicts your Item No. 2 (Stop changing rules on superannuation and the Age Pension).

    I would rather they make one big change - give Age Pension to all Australians who have paid taxes for say 20 years here, and tax all income above that, and also remove all special pensions for past & present Politicians, Govt employees and Judges and make them eligible on the same rules as everyone else for pension. That would automatically stop further changes to the rules as it will hit the politicians hip pockets!
    Kaye Fallick
    27th Apr 2017
    3:22pm
    Hi George - many thanks for your feedback. I was probably not clear enough, but in point 2 I called for a comprehensive review, followed by one-off grandfathered changes, then a 5-year moratorium on changes - so i do want the big changes that are clearly needed - then a moratorium. Hope that helps, warmest, Kaye
    Anonymous
    27th Apr 2017
    5:10pm
    A comprehensive review was promised when the assets test was changed but like other promises, the promise was not honoured. It's past time for some integrity and honesty in government. The biggest change retirees need is a government they can have confidence will act fairly and honestly and abide by its undertakings.

    As for the issue of rent assistance, I sympathize with those few who, through no fault of their own, find themselves without a home in retirement but I am fed up with seeing those who struggled for 30+ years to pay off a mortgage disadvantaged for doing so while many who lived the high life now demand hand-outs to help with rental costs.

    The ''down-sizing'' argument, like many other assumptions, ignores the individual challenges many face due to health or family circumstances. For example, a retiree couple cares for five young children for 16 weeks a year of school holidays to help their widowed son who can't care for them during those periods. They therefore need a larger home. Why should they be financially disadvantaged over a couple who don't have that sort of family obligation but pay rent because they partied and gambled all their working lives and didn't bother to pay off a home?

    The current system punishes initiative and responsible living and planning, and that's detrimental to the nation overall. It also disadvantages many whose circumstances are challenging for reasons that are uncommon and not factored into any legislation.
    Anonymous
    27th Apr 2017
    10:52pm
    Thanks, Kaye, for your clarification.
    I agree with Rainey's detailed analysis about the current messy system which can get even more messy & complex if we make further targeted changes to it such as getting into the family home assets, etc. While a comprehensive review would be good, I would be very wary of it's outcomes if it is dominated by Industry "experts" and other interest groups such as ACOSS, all of whom drive their own agendas.

    Hence, I believe my suggestion described above to rip up the entire Pension system and replace it with the same Age Pension for all who paid taxes here.......etc, etc, - would avoid all complications, and let people downsize, draw down equity, or do whatever else they please with confidence that the OAP is not affected, only the taxes on their investments. It would be the fairest solution for all, and also reward those who put effort into building their own savings, not penalise them as in the current system.

    If there is any concern about sufficient funding, I have another Budget idea (also a radical one - similar to the "Buffet rule"):
    Introduce an Alternative Minimum Tax (AMT) of say 15-20% for Companies and say 30-35% for Individuals on Gross Income (not allowing the variety of shonky Deductions claimed by Multinationals, Large Companies and the rich to avoid / minimise tax). This measure could rake in Billions.
    Anonymous
    1st May 2017
    1:13pm
    Sound thinking, George. Sadly, I don't think the idiot LNP will give up their passion for social engineering to make the rich richer any time soon.
    Hawkeye
    2nd May 2017
    11:32pm
    George
    As a retired government employee, can you please tell me what special pensions I am entitled to.
    Also can you please inform me about all these different rules that apply to my OAP eligibility.

    I agree with paying OAPension to everyone and taxing anything above it. It is not new idea. I remember discussing it with my father when I first joined a Super Fund 46 years ago, and he had held the same belief for many years before that.

    But just STOP TRYING TO STEAL MY SUPER. I paid for it the same as anyone else (and probably at a higher contribution rate than most).
    Contrary to what you seem to believe, government employees do NOT get any any free pensions and are subject to exactly the same rules as everyone else regarding OAPension.
    Kathleen
    27th Apr 2017
    1:05pm
    Correction ... our home cost $340000 not $34000 lol!
    Hawkeye
    2nd May 2017
    11:37pm
    OH BUGGER!!!!
    I was gunna offer you $68000 for it sight unseen.
    Joy Anne
    27th Apr 2017
    5:09pm
    Excellent points. I agree with them all. I am a Pensioner and rent and that has increased every year. I now pay 60% of my pension in rent. This means to pay for Registration which has gone up for 6 months $25 this year. Also medications as I cannot take Generic, this is a problem for a lot of retirees. Must have a phone which is another $75 month. Electricity I pay fortnightly like a lot of my regular expenses but find it hard to save any unless I don't buy food. This has me living on the edge and also fuel for car and making sure service is kept up as doing short trips can ruin your car. I hate the LNP they take away from the people who need it most and can't even take away RETIREMENT PENSIONS AND PERKS for Politians (This has been mentioned for over 12 months and still nothing done.)
    Nan Norma
    27th Apr 2017
    8:42pm
    I own my own home. Unlike renters, I have to pay for maintenance. Last week I paid $185.40 just to have a small seal replaced on a water heater. It was a ten minute job. The power went off the other Sunday cutting the fridge and freezer off. $350. Every little job cost a fortune.
    luckily I don't have to pay for mowing. Of course there is still the rates which is about the same as some people pay for rent in public housing. House owners don't get it that cheap.
    Alexii
    27th Apr 2017
    9:52pm
    You are quite correct, Nan. There are so many expenses to owning a home and they increase as it gets older. Insurance is a real killer too.
    Alexii
    27th Apr 2017
    9:52pm
    You are quite correct, Nan. There are so many expenses to owning a home and they increase as it gets older. Insurance is a real killer too.
    Alexii
    27th Apr 2017
    9:52pm
    You are quite correct, Nan. There are so many expenses to owning a home and they increase as it gets older. Insurance is a real killer too.
    Anonymous
    1st May 2017
    1:21pm
    The cost of owning a home in retirement is often much higher than paying rent, yet renters get all the sympathy and assistance. Many retirees are regretting spending 30+ years struggling to pay off a mortgage, as those who spent on holidays and parties instead are now getting generous handouts.

    Some renters are really doing it tough and I support programs to assist them, but the method of assessment needs to be overhauled because in many cases those getting rent assistance are far, far better off then struggling home owners burdened with high maintenance, rates and insurance costs and having their pensions slashed as ''punishment'' for having battled to pay off a mortgage.
    MB100D
    2nd May 2017
    7:27am
    How are Pensions Slashed because you pay off a mortgage?
    Anonymous
    2nd May 2017
    6:03pm
    The upkeep of a home as you age is an expense and a worry. That is why many are opting for some sort of retirement village or whatever where of maintenance/upkeep etc is done by others.

    Granted you pay for it; but if you can afford it why not.

    There are no pockets in your shrouds!
    Sundays
    28th Apr 2017
    8:27am
    Sorry Kaye but an influx of large well located properties onto the market when retirees sell their homes will not benefit young people. They just won't be able to afford them. Rather, without changes to negative gearing they will just be snapped up by cashed up investors
    Sallad
    28th Apr 2017
    12:50pm
    Great article Kaye and I agree wholeheartedly with every single point raised by you. I would also like to see a crackdown on "Family Trusts". Never going to happen I've been told because the majority of our 'pollies' have got them to reduce their own tax liabilities.
    Would be interesting to find out exactly 1/ How many of our 'pollies' have Family Trusts and 2/ How many of them are involved in 'Negative gearing'.
    Sallad
    28th Apr 2017
    1:21pm
    Just found this article on Family Trusts via 'Uncle Google'
    http://www.smh.com.au/national/whatever-you-do-dont-mention-the-trusts-20170406-gvf2pk.html
    Virginia
    30th Apr 2017
    11:28am
    We are all crying poverty.. You live in the best country. there are too many safety nets for thoes who live for today and blow tomorrow. Retirees if they made reasonable choices when working they would have a good nest egg and if they don't there are much better welfare perks than so many countries. People who lost their pension or some of it in the new rule change do have enough to live a reasonable life. We are the wealthiest generation in Australia
    Anonymous
    1st May 2017
    1:18pm
    I agree with that, Virginia, but I object to the way the pension means test is structured on the grounds that it is inequitable and punishes responsible lifestyle choice and hard work, while encouraging and rewarding laziness, overspending, manipulation and cheating. Ultimately, that is going to destroy our economy. I don't see objecting to an economically unwise policy as ''crying poverty'', but rather as sensible comment intended to drive a rethink about the erroneous attitudes of those whose focus is on an idealistic approach of giving only to the poor - which can NEVER HAPPEN.

    We need to drop the idealism and start being practical - considering human psychology rather than focusing on pure economics or mathematical formulae that can't work because of psychology. To build a healthy economy, we must reward work and responsible living choices and incentivise the behaviour that is good for the nation as a whole. Currently, OAP policies do precisely the opposite.
    Anonymous
    2nd May 2017
    5:59pm
    Agree entirely with you Virginia.

    Some planned ahead, some didn't, some couldn't.

    Those that didn't plan and those who couldn't are looked after much better than a lot of other countries where there is no pension at all for elderly people.

    2nd May 2017
    5:57pm
    It is a bit late for any input now...the Budget is bedded down by now.


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