A Grattan Institute report claims that super’s importance is overblown

A new report claims that super’s importance to retirement savings is ‘overblown’.

The Grattan Institute claims that super’s importance is overblown

A Grattan Institute report claims that superannuation savings only account for a small portion of retirement savings and that increasing employer contributions to 12 per cent would be a mistake.

According to the report, How households save for retirement, which takes into account statistics from the Australian Bureau of Statistics (ABS) and the Household, Income and Labour Dynamics in Australia (HILDA) report, the discussion about ‘savings for retirement’ and ‘superannuation savings’ being the same thing is a “big mistake”.

The study draws the conclusion that superannuation savings account for just a small portion – around 15 per cent – of total retirement savings. Instead, says the report, the average Australian saves as much outside super as within the system, and that many households have assets other than super that outweigh the value of their homes.

Many industry pundits point out that the super system is still quite young, saying it will be another 20 years before the typical retiree will have had 9 per cent of a full working life’s wage put into super. However, the report states that, even discounting home ownership, households in the 25 to 34 and 35 to 44 age brackets still have assets outside super that are larger than those inside super.

The report claims that households set aside a larger portion of wealth outside super so they can draw down on it prior to retirement age. They may also be motivated by a fear that the Government will make future changes that affect their super savings.

These findings could have implications for retirement income policies, especially when the compulsory contribution rate moves to 12 per cent, as scheduled over the coming years. The report suggests that higher compulsory rates are not necessary and will come at the expense of lower wages, thus reducing the quality of life throughout most people’s working years.

Read more at www.grattan.edu.au

Opinion: Beware the law of averages

Although the Grattan Institute appears to make a compelling case, claiming that super’s importance to retirement savings has been “overblown” may seem a stretch, especially when its estimates are based on averages.

If the purpose of super is to supplement or substitute for the Age Pension, then surely the Government’s intended legislation to increase the compulsory contribution rate will do more to cover the future cost of an ageing population and reduce dependence on the pension to ensure a decent life in retirement.

The report’s claim that Australians save just as much outside of super seems a bit far-fetched, especially when we consider that many older Australians are living just above or below the poverty line. Compulsory super savings will assist the retirement of many of these people.

The report is based on research from the ABS and HILDA which, in turn, draw their conclusions based on averages. These numbers also take into account the fact that retirees own their home. Wouldn’t it be wiser to work from averages that discount those who rent or part-own their home? And, as we all know, those averages are skewed by the ultra-wealthy. When we see a report that excludes the top two to five percent of earners then, maybe, we can take the Grattan report a little more seriously.

Until then, let’s allow the Government some leeway while it traverses its current path. Superannuation policy is being reconstructed with the aim of relieving pressure on the budget, both now and in future. Having a public forum where the true ‘average’ Australian can submit their thoughts and ideas about super and how it affects them is also a great and fair idea, so long as those public recommendations are not completely ignored.

What do you think of the Grattan Institute’s findings? Do you agree with the notion that superannuation is overblown? Do you think that your superannuation savings are a vital part of your retirement income?

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    COMMENTS

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    johnny
    4th Oct 2016
    10:32am
    Other than my home, super is the only savings I have left for my retirement. So, I don't know what on earth the Grattan Institute is talking about.
    Baysider
    4th Oct 2016
    1:18pm
    The Tories have never like super for the masses ever since Keating brought it in they have eroded it just like Medicare (remember it was originally Medibank then they privatised it to make it Medibank Private and Labor had to start again) The consensus among supporters of super is that 15% is required for the whole of a working life to replace the age pension. We are nowhere near that, forcing ordinary workers to rely on age pensio, "the dreaded welfare" that takes so much of the budget according to ScoMo, for decades to come and to be told they are leaners not lifters by the likes of Hockey. I get the feeling that this is a "Divide & Conquer" tactic but would that suggest it was class warfare?
    Like johnny I am glad to have the bit of super that I have to augment the poverty level pension.
    Anonymous
    4th Oct 2016
    2:21pm
    People don't save money easily and governments know it.

    Governments need people to keep borrowing and spending more to increase the GDP and hopefully expand the economy and create jobs.

    If they can delay the 12% super guarantee they know most people will keep spending and not saving - and keep the economy going.

    Grattan appear to be supporting what the Libs are doing - delaying going to 12% super guarantee until mid-next decade.

    It is lies, damn lies and statistics portraying the majority of people are successfully saving outside of compulsory super - except in their homes.

    I think the ruling elite are likely worried about the economy and the globally highest levels of household debt that Australians have run up to fund housing and consumption.

    They need the money in circulation.

    So bugger the future - get the masses to spend - let them go on aged pensions that we (the ruling elite) control - and then control the votes of the same masses - with our occasional frugal election giveaways.

    And so those who pay attention - and the elite of course - have super and other assets in retirement - and are not so beholding to the next generation of elites.
    Rosret
    5th Oct 2016
    9:30am
    Baysider, of course both government parties want us to be self funded. The aim, from either side of the fence, is that the pension will become virtually non existent hence the continual raising of the age bar and the lowering of allowable assets.
    However, the ability for private employers to contribute more to the superannuation funds at the moment would have a profound affect on production cost. The last thing we need is more Australian private businesses going bankrupt or more workers being laid off because companies can't afford to pay into super.
    Captain
    4th Oct 2016
    10:47am
    The Grattan Institute appears to favor the more wealthy section when delivering their findings.

    If you save into superannuation over 40+ years you should reap the benefits of tax free income.

    Saving outside of super, unless you are quite rich should be limited to a maximum of 2 years of living expenses to the value of your annual earnings for those two years.

    I am only talking about those who entered the workforce since the late eighties/early nineties.

    If the Govt can keep their greedy fingers out of people's super, retirees could enjoy a great retirement. The one thing to remember is that you, the individual, need to be aware of your financial situation at all times in order to be able to enjoy retirement.
    Anonymous
    4th Oct 2016
    4:03pm
    How true Captain when you say that Government should keep their greedy fingers out of peoples' super. Keating used to say that you shouldn't get between Premiers and a bucket of money but I'd suggest that the quote can be widened to include all politicians and a bucket of money.
    Anonymous
    4th Oct 2016
    5:52pm
    Captain - you don't worry about changes - a long history proves super usually works in your favour - and gets fixed if it doesn't.
    Chef
    4th Oct 2016
    10:57am
    Not sure what is behind this article or its intended purpose. As a self funded retiree I would be destitute without superannuation. Best thing that ever happen to me financially.
    Old Geezer
    4th Oct 2016
    11:25am
    My super is nice to have but I don't need it.
    Anonymous
    4th Oct 2016
    11:42am
    Geez, tell someone who cares and believes you fairy tales, but DO keep commenting though as your words do add comic relief to the site.
    Old Geezer
    4th Oct 2016
    12:10pm
    Wow you really do live in a different world to me Fast Eddie. I don't believe in fairy tales but focus on reality myself.
    Fliss
    4th Oct 2016
    12:44pm
    Your comment doesn't make sense to me Old Geezer.
    If you are meaning you have sufficient funds outside of super to be self funded, then that is financially not astute.
    Earnings in super are tax free - outside of super - earnings are taxed once greater than $18200. No comparison.
    Old Geezer
    4th Oct 2016
    12:59pm
    Yes I know that earnings inside super are tax free and make the most of it. I can earn a lot more than $18200 before I pay any tax too. Having lots of money is super is not always a good idea financially even thought the earnings are tax free.
    Retired Knowall
    4th Oct 2016
    4:17pm
    The prudent strategy is to ensure sufficient diversification.
    The tried and tested formulae is Super, Property and Shares. At this stage of the economic cycle all 3 are doing well.
    Fliss
    4th Oct 2016
    4:23pm
    True . . . . of course you can have Property & Shares IN super - keeping the tax lower/non-existant.
    Old Geezer
    4th Oct 2016
    4:33pm
    Investing purely for tax reasons is not a good idea. My first objective is to make money and tax is only a secondary issue.
    Fliss
    4th Oct 2016
    5:00pm
    Agree - absolutely!!
    Made that a rule for myself many years ago when I was trying to reduce a huge capital gain. Decided that I would only invest for growth - NEVER invest to simply reduce tax.
    But, you were talking diversification - I was simply saying you can still diversify between shares, property, etc - under the umbrella of super.
    Old Geezer
    4th Oct 2016
    5:05pm
    Unfortunately you can't buy holidays homes or homes for the relatives in your super fund. Buying property to rent to job public is not my forte at all.
    Fliss
    4th Oct 2016
    5:10pm
    Correct! Re can't buy holiday homes, etc in your super fund. Absolutely.
    And good reason for having certain assets in super (with a limit of 1.6 million) & certain other assets outside of super.
    Old Geezer
    4th Oct 2016
    11:24am
    15% in super savings sounds about right to me as I only have about 10% of my wealth in super and I know most wealthy people do not use super the same way that others do. Super has too many strings for wealthy people. It is as simple as that.
    Herbie49
    4th Oct 2016
    11:54am
    You must be very wealthy Old Geezer, a few post ago you indicated you had 400k in super, so if that's only 10% of your wealth you don't need to be in here making negative comments about us poor people. Why not offer some decent advice, rather than tell us strugglers we don't need a passion.
    PAYEdmydues
    4th Oct 2016
    12:42pm
    I've had SMSF for 20+ years and now in pension phase. Very pleased with arrangement. In my case super is about 50% of our wealth incl all real estate. Super is 90% of income.
    Fliss
    4th Oct 2016
    12:47pm
    PAYE dmydues, sounds perfect!!

    Old Geezer . . . . if you have 400K in super & 4 million outside of super, that is crazy. up to 1.6 million can be in a tax free environment. You need to speak with a good financial adviser.
    Old Geezer
    4th Oct 2016
    12:56pm
    It would make no difference to may tax if I had any more in super and besides I can't add any more due to my age. No financial advisor can make me young again.
    Fliss
    4th Oct 2016
    1:01pm
    Lol! True that . . . . . ;)
    I'm just hoping that you don't pay tax on earning of your funds outside of super.
    Shame that once past a certain age you can't continue to add non-concessional contributions to super. I would imagine many people would be selling investment properties & would like to add the funds to their super.
    Janus
    4th Oct 2016
    11:26am
    The Grattan inst was clearly talking about those who are in their earning years, not those in their get-it-back-out years. I would hesitate putting heaps into super now, if was earning, as the governments seems to be making it difficult and trying to persuade you not to. Future? You mean next election year? Even if it was attractive - it isn't - they will change their minds soon so there is also that uncertainty. OK, I meant NO TRUST!

    The logical of the current approach to super seems to be to make sure that all of us oldies get onto the pension sooner, especially if you had accumulations just over the reduced asset limit recently imposed to punish us. Spend it as soon as you can (mostly overseas!) so that you can get some benefits from the government in the future. It is not just the money, there are other plusses.

    I worked hard for 40 years, saved it all, no big holidays or cars or boats or luxury house, set my goals, just so that the current government (with the support of the others as well) can tell me great, we will change the goal posts and make it so we will give you nothing. I will never forgive them.
    Rae
    4th Oct 2016
    3:03pm
    There are a lot of those betrayed who feel exactly the same way.

    You can't trust them so why lock away money and pay fees, charges, insurances, audits etc when you can make money outside super and all it costs is the trade and a bit of tax.

    Not even much tax as you can earn near to $32000 before paying any tax and there are lots of deductions, franking credits etc.

    Of course governments can always change the rules can't they.

    But it certainly is wise to spend some money enjoying youth while young.

    This obsession with privatisation and destroying government through fear of taxes will mean we become like those countries where people have to save for education, health and old age.

    Third World.
    PIXAPD
    4th Oct 2016
    11:29am
    The Aged Pension is more that enough to live on and can save up to $7800 a year
    francobee
    4th Oct 2016
    11:46am
    I think that depends a lot on your circumstances, if you are paying $250 to $300 per week on rental I doubt if you would find much to save out of the age pension. As an aside, how are we pensioners going to convince those who make the decisions, to bring the deeming rate into line with the official interest rate instead of the inflated rates at present ??
    Rosret
    5th Oct 2016
    9:16am
    So your fridge hasn't broken down or you don't need a crown on that aching tooth? Glad you can save that much. I guess on the pension you receive a lot of benefits that the privately funded super recipient doesn't. Remember a single pensioner only gets $12K. Its nice there are two of you which does help as food is not the biggest household cost.
    Adrianus
    5th Oct 2016
    9:58am
    PIXAPD, you have obviously put some thought into how your financial situation can be managed and it seems you are being rewarded for your resourcefulness. Good for you buddy!
    But spare a thought for those poor retirees living in a $2m inner city house and doing it tough.
    Adrianus
    5th Oct 2016
    10:15am
    francobee, the RBA cash rate is a 24 hour lending rate which has 2 main objectives as I see it. Firstly to set an exemplary cost of M1 and secondly to influence inflation within a band of 2-3%. If inflation were to get too high then so would your costs. You would pay more for everything which means that your income would buy a lot less. I'm sure the new RBA governor would love to see pensioners getting higher rates but at what cost to the Australian economy? If the cost of money is higher then so too is the cost of the goods produced by that money.
    The big winners these days are those borrowing at very low rates and putting that money to work in a growth asset such as Real Estate in Sydney or Melbourne. This too will come to an end.
    PIXAPD
    5th Oct 2016
    10:26am
    I said>>>> ' can save up to $7800 a year' UP TO means maybe a person might save $3000, or $2000, or $5000. The point being as
    francobee' said.

    I make a comment to encourage others, for instance many pensioners have DEBTS, why is that, it is their business but why?

    That's one position, others have not thought out their budget, or rental.

    Now it's not easy for some..but I have said before that Affordable Living is a good way to go if you rent, you can get a studio apartment, not big but sufficient for around $150 a week when you get a return each fortnight of $130 rent assistance. So if your rent is say $216 week, (30% pension in Affordable Living) you pay from the pension the $432 f/night and get the $130 back, so you really only pay $302 or $151 a week, see how that works?
    Adrianus
    4th Oct 2016
    11:34am
    It is a huge error of judgement to think that Superannuation should be the only method of wealth creation for you. If you were to divide your wealth into 4 sections.

    1. Day to Day expenses. eg, food, hobbies etc
    2. 12 monthly expenses. eg, car rego, emergency expenditure etc.
    3. Medium term investments. (wealth creation)
    4. Long term investments. (wealth creation)

    then Superannuation is a superb Long Term method of wealth accumulation.
    Anonymous
    4th Oct 2016
    1:03pm
    Frank
    Good contribution but I disagree with Superannuation being a superb Long Term investment. Given the huge fees (especially of corporate superannuation schemes) and being totally subjected to 'the market' which is a MANIPULATED being these days, this aspect is pretty much a ferfy.

    A govt run superannuation scheme would be the absolute best way to go with strict (very strict) legislation that requires 75% of Australians agreement to allow access by the government. Nothing like what Menzies did by raiding the national fund which became 'vapour' and was frittered away.

    Investments would be assured (because of the size of this fund) and the market conditions would not prevail because of the constant influx of national contributions. It would also STOP the ABUSE by the wealthy in this area.

    The other concern I have is that you are assuming that all people have money AFTER point 2.... forgetting that the only thing keeping inflation down at the moment is the level of wages which has not increased for many years (and have actually dropped, apparently), after considering CPI's etc.

    Australians are now competing with 457 visa holders for work and this group are growing daily. A lot, lot worse than Refugees as they don't have Australian health or security checks, plus the money goes overseas to their families (after they get ripped off with exorbitant accommodation and food charges). Bad all round for our economy and those Australians who are on border line wages!!
    Adrianus
    4th Oct 2016
    1:29pm
    I disagree with the concept that the government knows how to handle my personal finances better than I do.
    Take a look at what the QLD government is doing with the PS super fund. Withdrawing funds to pay down debt owed by state run power generators. Then increasing power prices to get money back from the workers to repay the super funds. Why??? Because they can!
    Anonymous
    4th Oct 2016
    2:28pm
    Frank

    When INDUSTRY SUPER FUND do a better job than private and even BANKER super funds, you know that the PRIVATE sector is ripping you off.

    Bankers invest your super $$ into their OWN investment schemes so that they can make even more $$ money out of super funds (it is commonly called a RIP OFF). Many of the Financial Advisers have to acquire their Registration as a Financial Adviser UNDER one of the LICENCED BIG BOY groups, such as Bankers & Insurance Houses. I believe some professional bodies, such as CPA Australia now have a LICENCE to register Financial Advisers which is a GOOD THING!

    Of course you would set up a GOVT SUPER FUND with legislation that strictly regulates the fund, i.e.. Govt can't touch it, as it is NOT government FUNDS, it is the people's super, just as current super funds do not belong to the ADMINISTRATORS of PRIVATE super funds but the contributors or members.

    EASY PEESY, mate... all signed sealed and delivered for the betterment of Australia and super contributors. With the rip off bankers/insurance houses given the boot, along with the wealthy who RIP the system and get huge tax benefits and even Industry funds which the LIBS spew their dogma over, would cease to exist! Joy for all, YES!
    Adrianus
    4th Oct 2016
    2:38pm
    Mussitate, I don't see the huge fees in Superannuation? Maybe you could give us an example?
    Also, can you suggest an investment alternative which is not "being totally subjected to 'the market'?"
    If you're talking about the share market, well, that is to be expected. It's a cyclical thing. Would you have been complaining 25 years ago when the ASX was posting 30% returns for a few years and all the RBA could do was tighten monetary policy which had government securities running at 30%. If you don't get the bad times how will you know when you're in the good times?? :)
    Rosret
    5th Oct 2016
    9:50am
    I am not sure which super fund you are with Frank but they have fees no matter what. Not only that, they don't pass on the full benefit of their financial gains for the year. They give you what they think you should get.
    Adrianus
    5th Oct 2016
    11:30am
    Rosret, I understand that there are costs in managing Super Funds and costs associated with Funds management. These costs were increased by the Gillard Government. Surprisingly, many more people are trying to increase the cost of master trust funds. The Unions put up a fight against Gillard but lost.
    Not Senile Yet!
    4th Oct 2016
    11:47am
    These dumb institutes refuse to calculate without the top earners to bring their so called averages up!
    If they excluded everyone above $80,000.....then their figures might be closer to average!
    Meanwhile....they are just crap!
    And Super was screwed once Govt started to tax it annually on earnings.....which was not how it was meant to be!
    Old Geezer
    4th Oct 2016
    12:09pm
    Ordinary people rely on super but the rich do not so this article is close to the mark with only 15% of total savings investment.
    Adrianus
    4th Oct 2016
    12:16pm
    The average wage is around $80k.
    Yes, I agree with you regarding the extra taxes. What can you expect though? Vote in a Labor Government and they will introduce new taxes.
    Anonymous
    4th Oct 2016
    1:44pm
    Ordinary people like you OG - don't even know the answer to one of the main tax benefits of testamentary trusts.

    I think your wild guesses about what the rich do with super is way, way past your pay grade.
    Old Geezer
    4th Oct 2016
    1:50pm
    Ha ha yes I have decided not to play your game simply because it has no relevance to the topic what so ever.
    Anonymous
    4th Oct 2016
    2:31pm
    OG - considering you have - at BEST - $40K in super - I would give that subject a very wide berth as well.

    It is also WAY PAST your experience level and pay grade.
    Old Geezer
    4th Oct 2016
    2:41pm
    That's real funny Reasons as one would not even bother with super with that much. From memory I have to withdraw more than that each year now to keep it tax free.
    Anonymous
    4th Oct 2016
    7:48pm
    OG - I think you need to write down what you tell us - your memory is the problem...

    You told us YESTERDAY that you had a $400K total assets.

    You told us TODAY that you have 10% in super.

    That simply means you ONLY have ~$40K in super.
    Old Geezer
    4th Oct 2016
    9:20pm
    No Reasons you assumed wrongly I only had $400,000 in total assets. Go back and read it literally and don't assume anything.
    Anonymous
    4th Oct 2016
    10:10pm
    I NEVER assume anything OG.
    Old Geezer
    4th Oct 2016
    10:42pm
    That's odd as I can't see how you made the mistake otherwise.

    Reasons you also need to correct your maths. If a person has a total assets of $400,000 outside super and 10% of their wealth in super they do not have $40,000 in super.

    4th Oct 2016
    11:56am
    Personally, I wouldn't trust the findings of the Grattan Institute as they are the recipients of a lot of taxpayers' money from the government, and, as with any research, investigative, or survey organisation, they WILL provide the findings that the FUNDER DESIRES. As for the employer increasing their contributions, I don't like the idea for at least two reasons; one is that the increase in employer contributions will probably lead to higher end user costs to cover this added expense (yes, I know, "what's new?") and these increased employer "savings" will only be stolen by legislative changes at retirement age by the government like they are doing with our nest eggs now! Skepticism and cynicism? NO, this is the plain truth of what is happening to most retirees right now! Pathetic and abusive!

    4th Oct 2016
    12:14pm
    The 'average' does not cut off the extreme top or bottom as the 'medium' does which means that things are really bad when looking at the superannuation proposition.

    If it is not worth it WITH the extreme top who get huge tax benefits from superannuation, included, then it must be pretty ordinary for the rest of us.

    We should get rid of all the PRIVATE ENTERPRISE, SMSFs and INDUSTRY super funds.... and replace them with a GOVERNMENT superannuation fund which is similar to Singapore (maybe) which gives power to the govt and not private corporations, wealthy and industry groups. PLUS best of all, the super CONTRIBUTORS are assured of a fair and just return on their super investment, irrespective of the MARKET conditions.

    Safer and better superannuation for all.... couldn't be any worse than the RIP OFF we are currently having to put up with.
    Adrianus
    4th Oct 2016
    12:24pm
    A government super fund??? Government paying retirement incomes? I thought we tried that but we gave permission to the government to scrap it and use the money for vote buying or some other equally worthless endeavour.
    KSS
    4th Oct 2016
    12:59pm
    Mussitate superannuation in Singapore is NOT Government paid. Simply put: employees MUST contribute about 20% of their salary to super and the employer another 12%. All up there is a contribution of just over 32% of salary into super. You MUST meet the minimum sum in super in order to draw down from it in retirement. The Government will make up any shortfall for needy cases. Current minimum sum in super is Sing $150,000. To get a 'payment for life' from the Government you MUST have a minimum Sing $40,000. Retirement payouts are calculated on 20 years NOT life! There is a scheme where you can get monthly income for life and you do not have to have a minimum amount in your retirement account. BUT the payment is based on what you have there so the less you have, the less you will receive.

    I can just hear the howling now if such a scheme were to be introduced here. 32% contributions and the less you have the less you get!
    Old Geezer
    4th Oct 2016
    1:07pm
    So you want to contribute to a fund that pays you a pension when you retire. Heaven forbid if you die the day after your retire. All that money paid in for virtually nothing. Me thinks it's not a good idea at all.
    Anonymous
    4th Oct 2016
    2:08pm
    KSS
    Duh! we contribute from OUR wages as well.... the 9.5% is from SACRIFICED wage increases.

    There you go then.... WE (Australia) can do even better than that because WE are a wealthier NATION.... yes!

    So you have confirmed that IF Australia went to a govt run superannuation scheme the country and the people would be a lot better off.

    Good contribution, given that Australia could do it way, way better and make it work for all Australians.


    Frank
    Yes WE did start a National Fund but NO WE didn't permit Menzies to steal that fund, he just took it and it vaporised into thin air, Australia or its infrastructure didn't benefit from it or give specific authority for its demise.

    IF this wonderful national fund had been maintained, Australia and its citizens would be in a MUCH BETTER situation today!!!! But alas, the GIMME, GIMME regime took all for themselves and gave nothing back.... why does that not surprise me!
    KSS
    4th Oct 2016
    3:01pm
    Mussitate, you miss my point. We have been advised for years that the 'employer' contribution is not enough and that the employee must make extra payments. This has fallen on deaf ears by and large by almost all under the age of 50.

    If this or any other Australian Government were to adopt a 20% employee contribution (more than double the standard rate now) AND add another 12% from the employer, all hell would break out. THEN say your Government pension depends on how much you have 'saved' and the less you save the less 'pension' you will get - just stand back and wait for the fireworks to start.

    I am not saying whether it should be done like Singapore or not but ultimately it means if you don't work you don't eat! See how that will go down with the current recipients of welfare in all its forms.
    Retired Knowall
    4th Oct 2016
    4:26pm
    Mussitate The 'average' does not cut off the extreme top or bottom as the 'medium' does. WRONG...Check the definition of Median (and learn how to spell) before posting dribble.
    Chris B T
    4th Oct 2016
    12:46pm
    If Superannuation Is This Miracle Savings Vehicle, Why hasn't the Federal Government given it a savings Guarantee like the Banks & Credit Unions.
    Superannuation Funds Guarantee That There will be no Negative draw downs because of bad judgements/management of funds by them, Then proceed to charge fees for it.
    Once bitten never again.
    Adrianus
    4th Oct 2016
    1:20pm
    Chris B T, I have never heard anyone describe it as "This Miracle Savings Vehicle".
    It has always been looked on by retirees as an overnight success which has taken decades to achieve.
    Fliss
    4th Oct 2016
    12:53pm
    Crazy to keep assets outside of super - until you reach the 1.6 million threshold. No tax paid on earnings where as outside of super still taxable.
    Old Geezer
    4th Oct 2016
    1:01pm
    It is also crazy to have money in super if you don't need to have it in super.
    Fliss
    4th Oct 2016
    1:05pm
    Fair enough. :) Each to their own.
    I like the tax free environment of super & intend to make the most of it. I am not yet retired but want the full 1.6 million in super & another $600k or so outside of super. All earnings will then be tax free.
    Anonymous
    4th Oct 2016
    1:56pm
    Fliss - OG has trouble spelling the word super - let alone understanding it.
    Old Geezer
    4th Oct 2016
    2:35pm
    No one doesn't have to even spell super to understand it. It is nothing more than a tax advantaged investment vehicle with lots of rules and unnecessary paperwork.
    Fliss
    4th Oct 2016
    3:26pm
    Haha! Thanks Reasons.
    And Old Geezer, I agree with you that it is a tax advantaged investment with lots of rules - and I intend taking full advantage of it.
    I'm not being rude here, but I think you are possibly a generation before me - so most or all of your working life was prior to compulsory super. (Think it was introduced in the late 1980s?) Therefore you would not have a large amount in super.
    But future generations may not get a pension - or may have to work until they are 75 to get it. So I (not yet 60 . . . damn close though), intend to use super to my own advantage. I have a SMSF & intend using it to my advantage.
    Old Geezer
    4th Oct 2016
    4:34pm
    I actually have more than the average person of my age has in super as I grew it aggressively when times were booming.
    Anonymous
    4th Oct 2016
    6:06pm
    OG - you told us YESTERDAY that you had a $400K total assets.

    You told us TODAY that you have 10% in super.

    That means you have ~$40K in super.

    The average male super total is $150K.

    You have about 75% LESS in super than the average male.

    That makes you a very unsophisticated superannuant.
    Old Geezer
    4th Oct 2016
    7:47pm
    All I said was "You must have some lazy investments because I make more than the pension on less than $400,000. " That does not say that say I have total assets of $400,000. These assets are typical of what I see as a good spread of assets for anyone in retirement whereas my other assets and super are not as they are more growth not income assets. I actually have to take a pension of more than $40,000 a year out of my super so that it remains tax free so your assumptions are utter rubbish.
    Jim
    4th Oct 2016
    7:56pm
    There seems to be some misunderstanding regarding no tax in super, super fund earnings are taxed at 15% so that means your earnings are taxed at 15% I am amazed that this is not declared by anyone when ever there is a debate about super and tax, I am not referring to the 15% contribution tax that applies to when ever you put money into your super.
    Old Geezer
    4th Oct 2016
    8:03pm
    Once over 60 you can elect to have your super in a pension mode. You have to draw down a certain percentage according to your age and then your super fund pays no tax and you pay no tax on the amount you draw down.

    While your super fund is in the accumulation mode your fund pays 15% tax on the earnings. This is what you are referring to.
    Anonymous
    4th Oct 2016
    9:08pm
    NOT TRUE OG - it depends on your preservation age.

    You can elect to have your super in pension mode at 55 if you were born before 1960.

    OG - you are way out of your depth when it comes to super.

    GUESSING ABOUT SUPER RULES DOES NOT ASSIST PEOPLE.
    Old Geezer
    4th Oct 2016
    9:16pm
    Yes but the draw down may not be tax free until you get to 60. Maybe you can confuse everyone even further by explaining why.
    Old Geezer
    4th Oct 2016
    9:31pm
    There are also new rules on this that are yet to pass through parliament so until we get certainty discussing the rules for certain people between 55 and 60 served no purpose at this time.
    Anonymous
    4th Oct 2016
    9:35pm
    Hell OG - it is just NOT your day is it.

    You really need to have experience with super and some money in it to understand the rules.

    If you are UNDER 60 you just draw down on your $195K LOW CAP RATE - which is tax free - and pay no tax on your pension.

    Give up OG - YOU ARE WAY OUT OF YOUR DEPTH - you don't have the necessary super experience.
    Fliss
    4th Oct 2016
    9:40pm
    Dim, earnings on super ARE tax free once the fund is in pension phase. For majority of people this is when they turn 60 - as Old Geezer was saying. Or you can remain working & put funds into TTR phase - Transition To Retirement phase. This also allows earnings to be tax free - this is the case that Reasons refers to.
    Fliss
    4th Oct 2016
    9:48pm
    Reasons, can you expend on what "... draw down on your 195K low cap rate...." means?
    Anonymous
    4th Oct 2016
    9:52pm
    Fliss - no - that is not what I was saying.

    If you are completely retired and 55 - depending on your super total -you could possibly pay no tax on your annual pension up to age 60 - by using your Low Cap Rate of $195 to pay your pension each year.

    TTR is completely different.
    Anonymous
    4th Oct 2016
    10:00pm
    Fliss - we cross-posted.

    Every super fund has $195K of something called the Low Cap Rate available to it.

    That $195K is tax free - and of course assumes you have that much in your super.

    You just use a part of that $195K Low Cap Rate to pay a lump sum payment to yourself each year (the amount of your pension) and your pension under 60 is tax free - or is until you run out of your Low Cap Rate.
    Fliss
    4th Oct 2016
    10:16pm
    Yep, Reasons, we did cross-post.
    I'll have to research that Low Cap Rate info. Thank you.
    I'm just interested in understanding all aspects of super, even though I wouldn't be using it. I have SMSF & in TTR phase. Works really well.
    Old Geezer
    4th Oct 2016
    10:16pm
    Yes I know about the low cap rate too but it may not be $195K. Maybe you could explain why this is so? Mine is not $195K and I haven't withdrawn anything.

    That is another reason why I didn't go into that either. It is not as straight forward as you say.

    Remember also Reasons you super fund will still pay tax on earnings at 15% if you just draw down your low cap rate.
    Anonymous
    4th Oct 2016
    10:23pm
    Yes OG - you NOW know ALL about the Low Cap Rate I am sure.

    It may not be $195K - simply because someone might only have $40K in their super like you have.

    I wait with amused and baited breath to read you informing everyone about the Low Cap Rate in the future.
    Old Geezer
    4th Oct 2016
    10:27pm
    Wrong I have a lot more than $195K in my super fund.

    I didn't want to go there and still don't want to go there.
    Anonymous
    4th Oct 2016
    11:50pm
    Look OG you super DUD - I missed that part about tax on earnings.

    You are beyond contempt in your naivety on super rules.

    I don't think you could actually have ANY money in super.

    If anyone is stupid enough to listen to you - it is at their peril.
    Fliss
    5th Oct 2016
    12:12am
    Did a bit of reading on Low Cap Rate ..... interesting, and can see that it would be valuable tool in certain cases. I like TTR as it enables all earnings in the fund to be tax free, but can see positives for Low Tax Rate too.
    An idividual would need to carefully do their maths & decide which one would be most beneficial for their individual circumstances.
    Anonymous
    5th Oct 2016
    10:14am
    OG, when you tell "porkies" you should remember what they are, so when you tell them again (and you do) you remain constant with the previous one, old boy.
    Old Geezer
    5th Oct 2016
    10:14am
    Fliss unfortunately the new rules before parliament may see TTR super funds taxed at 15%. I suggest that you see an advisor and see if there is any way you can meet a condition of release before July 2017 (date at which TTR could be taxed from). If you can meet a condition of release then it will become an ordinary account based pension and it doesn't matter what happens after you have met a condition of release.

    Lots of accountants have people under 65 on TTRs even though they have met a condition of release. The easiest way to check this is make sure all your super is "Unrestricted Non Preserved" on your statement.

    The Low Cap Rate is only available for those between 55 and 60 as after 60 all super withdrawn is tax free anyway. If in the past you accepted a redundancy payout your Low Cap Rate may be different.

    Yes I am a super DUD as I just want to keep it all as simple as I can and not confuse people with all the exceptions to the norm in super.
    Fliss
    5th Oct 2016
    10:56am
    Haha! Thanks Old Geezer. :)
    What you have just said makes sense.
    I (luckily) turn 60 in January, so will be able to come off the TTR & into full pension phase if parliament do pass the new rules regarding taxing TTR funds at 15% on their earnings. And this is what I will do.
    I don't like talking with "financial advisers" personally - they haven't given me the best advice in the past - I like to try to research myself & then I often run my idea by my accountant.
    Old Geezer
    5th Oct 2016
    11:06am
    A few years back I engaged an accountant that does nothing but super and she is great as she listens to my ideas and researches things for me as super has so many twists and turns now.

    A tip for you if you are turning 60. If you take out your pension after you turn 60 it is tax free and is not prorated over the whole year. Some accountants do this wrongly. Anything you take out prior to 60 is taxed with a rebate allowed. This is clearly set out on the ATO site.
    Fliss
    5th Oct 2016
    11:34am
    My accountant also is a super specialist! :)
    I used to have 2 accountants - one for SMSF & other for our business, but recently move dto just the one.
    He has given me same advice - re taking out annual withdrawal from super AFTER I turn 60 in this financial year.
    Thank you . . . . . .
    floss
    4th Oct 2016
    1:46pm
    To make up for the loss of a full pension you would need at least one million dollars in super so if you are not super rich why would you put money into super, plus the risk factor,not to mention tax and greedy advisers.You can bet there will be a lot more changes not to our advantage . The Fed. Gov. we have at this time have lost their way.
    Old Geezer
    4th Oct 2016
    1:51pm
    You don't need anywhere near a million dollars to live much better than you would on the full pension.
    Fliss
    4th Oct 2016
    3:17pm
    Agree Looney.
    I don't know what a full pension is, but interest on a million is only $30,000 p.a.
    You can have 1.6 million in super & the $48,000 interest is tax free.
    So a couple can have 3.2 million in super & receive $96.000 p.a. tax free - earnings & withdrawals tax free.
    Old Geezer
    4th Oct 2016
    4:36pm
    If you super is a 30 plus year investment then it is not a good idea to have the money invested in cash a non growth investment as inflation and tax will erode your capital an awful lot over 30 years.
    Fliss
    4th Oct 2016
    4:57pm
    Again I agree Old Geezer . . . . BUT when you play with shares & it goes backwards - that's pretty upsetting too!! ;)
    Old Geezer
    4th Oct 2016
    5:03pm
    You buy when the market is fearful and sell when the market is fearless. It is as simple as that.
    Rae
    4th Oct 2016
    5:21pm
    OG you have to have a lot of confidence and understand risk/reward trade offs. Most people are terrified of losing. It is human nature and like you I am grateful for it. It is why they dump great assets for much less than value when there is a panic.

    Fliss your aspiration is terrific.

    Retirement with time and money is a lot of fun if you are well.

    Be aware though that as a couple you can earn $57 948 without paying tax from earnings outside super and up to $83 580 at minimum rates. SAPTO rates.

    Because you are still working the tax is painful but it will stop once you retire.

    It is good to have a couple of baskets. I draw down my living income from super but play outside where I can take advantage of market timing and take a few risks. I don't have the rules and regulations or sovereign risk there.


    If you go hard and make it into the top 10% I do believe most pay no tax at that point either.
    Fliss
    4th Oct 2016
    5:32pm
    Thanks Rae. I plan to have time, funds & health - am doing all I can to have all three. Currently, time is the most difficult - but it will come. :)
    I didn't know a couple could earn $57948 before paying tax??
    Will have to investigate - thank you!
    I currently salary sacrifice to the max, so not too bad there.
    I like your advice & appreciate it very much. Thank you Rae. :)
    Old Geezer
    4th Oct 2016
    5:46pm
    $57948 is a 5.7% on $1m so if you are only earning bank interest you will need more like $2m to get to this level of income. That's a lot of money you can have outside super before you pay any tax. Also if you trade shares or other investments you can write off all sorts of expenses off your tax.
    Fliss
    4th Oct 2016
    6:03pm
    Yup Old Greezer! That's the maths!!
    I researched & found the information Rae - thank you!
    So now I aim for 3.2 million in super & 1.9 outside! Haha!!
    Actually, have property that is returning much better than 3% (which are outside super), so probably more like 1 million.
    I have learned a lot today - thank you. :)

    4th Oct 2016
    4:09pm
    I had to double check the calendar to make sure it's not April 1. What is the Grattan Institute thinking? Any savings that can be held back to supplement an age pension has to be a good thing. If enough can be saved to cut out an age pension and give a government more funds to use on health and education has to be a good thing. Some are saying that 12% is not enough and it should be 15% but I think back to the world BK (before Keating) where the amount of compulsory super was 0%.
    Rae
    4th Oct 2016
    6:47pm
    Before Keating we actually owned a whole lot of public income producing assets though didn't we.

    It was then that this neo liberal, small government, privatisation, do it yourself thing started.

    There isn't much left now.

    There is even talk of NSW selling the Lands Title Office if you can believe it. For a yield of 7.8% to the buyer and forcing everyone into expensive land title insurance.

    Obviously the Government is in business for someone but it isn't the citizens obviously.
    Anonymous
    4th Oct 2016
    7:48pm
    Sorry Rae, I thought the topic was about super.Perhaps you should wait to vent your spleen about privatisation when that becomes a topic. I hate it when the subject gets twisted by bitter people.
    Old Geezer
    4th Oct 2016
    9:23pm
    Rae have you heard anything lately about doing away with stamp duty on real estate transfer and charging all land owners a land tax every year instead?
    HarrysOpinion
    4th Oct 2016
    5:12pm
    “Averages” are “the window blinds” to hide reality. In other words…’ frog-shit’! As for Superannuation…the younger workers will benefit in the long run. Employer contribution should be raised to 10% and a mandatory employee working lifetime super contribution of 2% of gross salary. You can do your own future value calculations. Suffice to say that if the younger generation continues employment to age of 70 they will have ample super saving to live off without going onto an aged pension.
    Adrianus
    4th Oct 2016
    5:40pm
    A 25-30yo on the average wage today has a super balance of $100,000. However, not many are that lucky because some employers are not paying the SGC and the ATO are often powerless to tackle them.
    I like the idea of a 2% compulsory employee contribution, but it could be harmful to the economy. Not to mention the political backlash from employee organisations. The youth of today have a huge burden in that they need to not only save for their own retirement but fund the retirement incomes of todays retirees. Our government should help them by balancing the budget and reduce debt.
    Dan
    4th Oct 2016
    7:01pm
    I would like to know the financial situation of those giving advice from the Gratton Institute . Maybe they have generous super schemes with employer contributions only or generous share option like the overpaid company CEOs and boards of directors For the average punter who has to save and try to contribute some of his own money after tax is the only way to save other than going into debt with mortgages in the property market that has low net income returns on investment and hope they live in a city that is lucky to have capital gains on property e

    4th Oct 2016
    7:37pm
    reading the comments in this column, just follow the example of most euro nations, the worker pays a percentage as does the the employer, this is the law, when the worker gets to the pension age he or she will receive a pension according to their contribution and years worked, it includes the average of their working life before the scheme was introduced and if you exceeds the income tax you pay the tax for exceeding the normal income tax as is paid by all employees,
    GrayComputing
    5th Oct 2016
    8:04am
    Since when is the use of "averages" not allowed to be used by every politician, scientist and engineer"?
    As the English PM Disraeli said "There are lies, dammed Lies and statistics"
    Each day we suffer more and more from these lies, dammed Lies and statistics.
    Rosret
    5th Oct 2016
    9:10am
    Hindsight is such a wonderful thing. My goodness if I had a little more cash in the 1980's I would have bought blocks of land - anywhere!
    The Real estate market is out of control and I really wish the government would put the breaks on it for our children's sake.
    When I started to increase my portion of savings into super I was future projecting on my parents superfund and life payout. However their superannuation was indexed to inflation and it worked on compound interest. Super today is fees and fluctuating stock markets. The superfund proprietors are doing very nicely with our money.
    Even the banks have stopped compound interest by making sure term deposit interest goes into another working account rather than the term deposit itself. Try and do that in reverse on your home loan and you'll be paying fees for early payment.
    On today's current trends investment in Real Estate is better. However the pendulum swings and one thing I have figured out is that the rich want the mediocrity to remain that way and will change the rules as soon as we get the hang of what is happening.
    Rosret
    5th Oct 2016
    9:21am
    Increasing the superannuation contribution rate at a time when middle to low income salaries have slumped would be yet another burden on the employers. The fact that wages are not rising is an indication we as a nation are not overly flush at the moment. The last thing the government needs is for private businesses to be pushed over the edge in tough times. After all we do still need to compete on the international stage.
    Chris B T
    5th Oct 2016
    9:41am
    At this present time no amount of your superannuation has to be used for providing pension's instead of the Government Age Pension.
    Spend on what ever you like pay off mortgage, buy a home, holidays, spend till it is all gone. There is no rules governing how to use super other than pension draw downs form savings remaining super after set age 65 for now.
    Who has what and how much is not of any concern of anyone else.
    The rules of how it is used needs to change. This free forall is not working, but that would have everyone complaining.
    Old Geezer
    5th Oct 2016
    10:20am
    I recently read a submission paper from a group of retired people who want it changed so that you can only spend your super on certain things. That is another good reason not to have all your eggs in super. eg Imagine having money is super and you needed a new car but couldn't have one as it wasn't allowed.
    Chris B T
    5th Oct 2016
    11:16am
    Needs and Wants, there is the reason for change.
    Spend all to receive a age pension.
    Superannuation was intended for relief in age pension dependency.
    A new car out of Superannution savings, would have to be a want.
    As you said the other eggs in the other basket, would be better for the new car.
    Save differently for wants.
    FM
    5th Oct 2016
    12:32pm
    Why, why are we reporting what the Grattan Institute is pushing. We know where it is coming from by now, trying to make retirees pay for ax cuts for the wealthy. What is John Daley paid to push his attacks on retirees?