14th Feb 2017

Should the Government raise compulsory super contributions?

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Should the Government raise compulsory super contributions?
Leon Della Bosca

The Grattan Institute is calling on the Government to rethink the increasing of compulsory superannuation contributions to 12 per cent, with an argument that, by making the recommended 9.5 per cent contributions, future retirees will be more comfortable in retirement at the expense of lower living standards during their working lives.

An article penned by the Grattan Institute’s Brendan Coates and John Daley claims that the Government’s proposed objective “to provide income in retirement to supplement or substitute the Age Pension” implies that super should not “aim to provide limitless support for savings that increase retirement incomes”.

The Grattan Institute suggests that these incomes in retirement should be balanced against better living conditions throughout a person’s working life.

The report states that, if a median-income earner works for 40 years and has the 9.5 compulsory superannuation contributions made, the average Australian would have a retirement income equal to around 80 per cent of their working wage. This means that many workers who have the benefit of a full working life of compulsory super contributions could enjoy a higher standard of living when they retire than they did during their days of employment.



The report’s final assessment is that lifting the super guarantee to 12 per cent would not only decrease the quality of life for many working Australians, but also make it more difficult for them to access the property market. This would mean that more future retirees would remain as renters rather than owning their own homes, need more fluid income in retirement and, possibly, reliance on the Age Pension just to have a roof over their heads.

Read more at grattan.edu.au

Opinion: Is it time to get real about super?

While the Grattan Institute makes a valid argument for keeping compulsory super contributions at 9.5 per cent, if Australians want to live the retirement to which they aspire, then there remains an argument for raising compulsory contributions to 12 per cent.

It’s worth remembering that when super guarantee contributions (SGC) were introduced, it was a trade-off by unions in return for not taking wage increases. The SGC is paid by the employer, not the employee, so why would the Grattan Institute suggest that this decreases the individual’s quality of life?

The Association of Superannuation Funds of Australia (ASFA) states that to live a comfortable retirement, a couple requires an income of $59,619 a year. Industry Super Australia recommends that a couple needs a joint balance of $775,628 to live comfortably.

YourLifeChoices Insights Survey 2017 of 6732 Australians shows that, to live a ‘reasonable’ lifestyle in retirement, 11.65 per cent feel that $20,000 to $30,000 will be sufficient, with most of those surveyed (68.32) saying that $30,000 to $60,000 will be adequate.

If Australians who retire at age 65 are expected to live for up to 22 years in retirement at just the base level of what our members deem a ‘reasonable’ manner, it will set them back around $440,000.

Yet only 27.58 per cent of our survey respondents have enough to fully fund that type of retirement (not accounting for investment returns).

And remember, that’s at just $20,000 per year – around the ASFA-recommended income for a ‘modest’ lifestyle.

Our research also shows that just under nine per cent of our respondents have the required amount to live what Industry Super deems a ‘comfortable’ retirement.

Of the 2629 members who are aged under 65, 19 per cent have less than $100,000 in super. Of these, 9 per cent say they’d need $20,000 to $30,000 for a reasonable retirement, 20 per cent say $30,000 to $40,000, 25 per cent say $40,000 – $50,000 and 22 per cent say $50,000 to $60,000.

The sums simply don’t add up.

The good news for this age group is that 57.63 per cent fully own their home, while 28.63 are still paying a mortgage and 13.74 renting.   

So, do these figures suggest that there is an argument for raising the compulsory super contributions? If the Government wishes to reduce reliance on the Age Pension, and for Australians to realise their retirement aspirations, then, yes, this is the case.

Many of today’s retirees have not had the benefit of a lifetime of compulsory contributions, so they’ve had to invest outside of super. Today’s workers may be more likely to invest in housing and not so much in stocks and shares.

Compulsory super has only been in play since 1992, when a three per cent contribution was compulsory. That rate has increased since then, but has been frozen at 9.5 per cent since 2014.

Many comparative OECD nations consider a higher level is more appropriate. For example, Singapore’s Central Provident Fund – a compulsory savings plan for workers and permanent residents created to help fund retirement, healthcare, and housing needs – is between 25 and 32.5 per cent of a workers wage.

Although current millennial workers, who’ll enjoy a lifetime of compulsory super contributions, may be able to live a comfortable retirement, spare a thought for those looking to retire in the next 10 years.

And besides, what’s wrong with working hard all our lives so we can enjoy a comfortable retirement?

But even considering the benefits of a lifetime of compulsory contributions, many Australians will still rely on an Age Pension to supplement their retirement income.

What does this say about our notions of retirement income? Does it suggest that, while we may have an idea of what we need to live a reasonable retirement, we may not have the funds to back it up?

Related articles:
Not enough money for retirement
Rich versus poor in retirement
Family home in assets test: ACCI





COMMENTS

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4b2
14th Feb 2017
10:27am
The original plan set out by Paul Keating was a good plan. If the Libs ad not screwed around with it we would not have the current problem. Labour are the only party with vision, and economic planning for the nation. The so called party born to rule only think of themselves.

Look at the WA decision to preference the mad hatters party over their own nationals? Anything to stay in power for the sake of power.
TREBOR
14th Feb 2017
6:15pm
While I agree, I think retirement issues rise above party lines - hence my post on amalgamating all funds under one roof, including those of politicians, and all run by the same rules.
George
15th Feb 2017
4:36pm
I don't agree that Pail Keating did a good thing - he was a con man who diverted attention from the real problem he faced, i.e. the lack of money to pay Pensions as Governments failed to put it aside using the 7.5% tax they collected for this purpose.

While a tax-effective savings option such as Super is great, the Govts of both sides failed to put reasonable caps on the amounts rich people could put into Super to minimise their tax at taxpayers expense.

A lot of this discussion is useless - the whole system should be changed and made simpler. The Government’s proposed objective “to provide income in retirement to supplement or substitute the Age Pension” is the problem - as the words "..and substitute" should be removed.
Age Pension should be paid in full to all who qualify say by tax-paying history of say 20 years in Australia, and all additional income (above the caps as mentioned before) should be fully taxed. That would get rid of Centrelink's role in the Pension process, and reduce the need for Financial Advisers who love these complications.
Rainey
17th Feb 2017
8:51am
Absolutely agree, George. It would also eliminate a lot of the cheating and manipulation and encourage honesty and diligence - responsible living that would boost the economy.
Old Geezer
14th Feb 2017
10:40am
Unfortunately super is just a licence for insurance companies to make money by adding expensive life insurance and eating it all away in fees. Life insurance should never have been included in super.
Old Man
14th Feb 2017
11:44am
Life insurance with super is an option, not an essential OG. In saying that, however, the default position is that you have to opt out of the insurance clause, not opt in. Most superannuation subscribers are unaware and are paying for something that is not only expensive but is not needed by the majority.
Old Geezer
14th Feb 2017
12:55pm
Old Man you can't completely opt out either as most super funds have a minimum life insurance you must still have.
FrankC
14th Feb 2017
1:25pm
Old Geezer, I am in HESTA. When I joined, I was ASKED if I wanted to add a term life insurance, I didn't have to, but I did.It costs me $6.09 per quarter for $100K.Also I had the option of opting out of it whenever I wanted.!! Yeah, very expensive !!!
Old Geezer
14th Feb 2017
4:55pm
Most just add it and then when you ask to remove it they will do anything to stop you. I had a fellow years ago ask for his life insurance to be removed when he joined they didn't. So when he left his job he asked for the balance to be transferred. He had put in over $2000 and the balance left was $180. He had me write letters and he eventually got all he had put in back but with no earnings.

Most super funds have put their life insurance premiums up a lot lately as they can't get the fees they used to and now want to charge extra for life insurance to make up what they are losing.
Radish
15th Feb 2017
8:42am
I am also with HESTA and what you said FrankC is quite true.

Transferred from another fund and that was one of the first things I was asked.

I chose to do the opposite I did not take out the insurance.
Farside
17th Feb 2017
10:07am
A few years ago I was briefly in a retail fund (AMP) and was surprised that not long after ceasing contributions to find there was only a few hundred dollars remaining from the $11,000 or so contributed. I later learned that life insurance premiums, which I agreed to as was in between contracts, and exorbitant fees had consumed the balance.
Paulodapotter
14th Feb 2017
10:48am
Given that wage growth has stagnated while cost of living continues to grow, the raising of superannuation to 12% in lieu of wage increases makes good sense. To say that keeping super at 9.5% will increase the quality life of workers is simply stupid and unsubstantiated. It's employers that pay the super, not the worker. To expect that employers will increase wages in lieu of not having to pay their employees 12% is real pie in the sky nonsense.
Batara
14th Feb 2017
11:33am
Paulo you are right mate. Anything that assumes employers would "do the right thing" is la la land material. That is the big fallacy in Malls tax cut strategy. The second fallacy is that any of the big end wallahs pay tax in any case. Neocons are out for themselves pure and simple. It is what the ideology is founded on - self-interest.
Rainey
14th Feb 2017
5:11pm
Employers pay the super??? Get real! Honestly, that is nonsense peddled by the gullible.

Employers pay what they are willing and able to pay for labour. More into super means less in pay packets. They can't magically INVENT money just because the SG goes up. And even those who can afford to pay more won't. As Batara points out, the fallacy in Mals tax cut strategy is the same fallacy as in any nonsense suggestion that raising the SG will help workers because employers pay it.

Everything is about self-interest, and employers hold the cards. Higher SG means lower wages. Of course they won't pay more in wages if the SG stays at 9.5%. But they sure will pay LESS if it rises to 12% - by whatever devious device they need to use to keep their bottom line growing at the rate they desire.
TREBOR
14th Feb 2017
6:16pm
Paulo - the super component of wages was in lieu of pay rises.... the employer is not paying it......
Migrant
14th Feb 2017
11:22am
Dear OG,
From my reading of life company recent annual reports , I gather that life companies lost huge amounts in excess of a Billion dollars, on their " superannuation" life business, by writing it at too low premiums for the risks they covered.
How do you justify your statement that it is a licence to make money.
Migrant
Old Geezer
14th Feb 2017
11:51am
Easy. I'll give you an example. A young school kid had a job for 2 weeks in the school holidays. The employer put in $120 into a super account for them. Within 3 months the balance was zero as they had allocated the lot to life insurance. This kid didn't have a choice where that super went and didn't even know until it was too late. If they had know they may have been able to salvage something as they had under $200 in total super and could have taken it out.

Another example a worker has 2 jobs and 2 super funds because neither of his employers will give him a choice. He tried to combine the 2 funds but no wasn't allowed because he had to leave $5000 in the small fund. Smaller fund had less than $1000 and as soon as the money went in it was taken out in fees. This fund is the top performing retail fund and they refuse to allow him to have no life insurance.

Super is OK if you have your own SMSF where you control everything but otherwise I personally would never have super.
KSS
14th Feb 2017
1:36pm
Roughly $650 a week is not bad pay for a young school kid which is what he would be getting if he was paid $120 super for 2 weeks work!

The story doesn't seem quite right as the kid would have had to sign forms to open the super account in the first place. Given the employer was actually doing the right thing in paying it in the first place, I cannot see they wouldn't have gone through the super paperwork as well. I also doubt that it would all have been allocated to life insurance. There are other insurances as well such as temporary or permanent disability, income protection and of course fees for running the fund. I don't doubt that it was all gone in a few months just your claim that it was life insurance that took it.
FrankC
14th Feb 2017
1:37pm
O.G. from those figures, the school kid would have been earning $667 per week. He was employed as a casual for 2 weeks, what the hell, was he doing to earn that.
FrankC
14th Feb 2017
1:41pm
Pity his father didnj'
t look into that and sort out that super company,,including taking it to the legal eagles. A school kid would never pay that amount for life insurance in 2 weeks.Is that super Co. still going ??? You have to wonder
Old Geezer
14th Feb 2017
4:58pm
Yes he was 18 so was paid an adult wage for 2 weeks and it was over $667 per week. The person that normally did that job wanted a couple of weeks off so they asked him to do the job for 2 weeks. Lucky kid was in the right place at the right time.
Rainey
14th Feb 2017
5:14pm
And you expect us to believe your crap, OG? Honestly, your stories get more and more fanciful every day. News flash, Old Goat. Readers here are MUCH more intelligent than you and can see right through wild fabrications.
sunnyOz
14th Feb 2017
11:17pm
Rainey, totally agree. It doesn't matter WHAT the situation, OG always has a personal example. And this latest fairy tale - instead of fairy's flying, I am sure I just saw some pigs fly past my window...
Old Geezer
14th Feb 2017
11:24pm
Ha ha Rainey. Unfortunately they are all true incidents and those involved now will not put any more than they have into super and will take it all out at the first opportunity.

N the kid signed no forms and the super only come about when they were doing their accounts from what I have been told. Since the kid didn't make an election the employer can just put it into his default super fund. Google it!

Yes it all went in fees and life insurance as I was shown the statement.
Rainey
15th Feb 2017
7:08am
I don't doubt some lose a lot of super to fees etc. OG. I did. Though things have improved since that happened. But your story is about as credible as a claim of seeing a thousand unicorns flying across the sky. And if you think anyone with a brain believes you, you are sadly deluded.
Old Geezer
15th Feb 2017
9:53am
Obviously you don't Rainey but that's your loss not mine or anyone else's.
Rainey
17th Feb 2017
7:59am
Nobody with a brain believes you, OG. You are looking like a total fool with your fanciful stories. We all know pigs don't fly, but apparently you haven't got the message yet. You need to develop two skills if you want anyone to take notice of your CRAP. First, develop a good memory, because the lies are obvious when you keep contradicting yourself, and second, learn to distinguish between credible lies and fairy stories - because yours are invariably the latter.
Old Geezer
17th Feb 2017
11:47am
NO lies just real instances Rainey and there is nothing wrong with my memory either. I certainly didn't get where I am today without financial skills.
Rainey
20th Feb 2017
8:33am
Saw those pigs flying again, at exactly 11:47 on 17th Feb. And you were right up there with them, fairy wings flapping and nose growing longer by the minute OG.
Sundays
14th Feb 2017
11:28am
Is the Gatton Institute also one of these organisations which think that retirees should access the capital in the family home via reverse mortgages to fund their retirement? Nothing they say makes sense. They either don't understand how SGC works (ie paid by the employer), or have no idea how much money people need in retirement. Gone are the days when Granny and Grandad just sat in front of the TV all day
fedup
14th Feb 2017
11:36am
Well the Government wants us all to work longer and provide for out retirement I have been working to put as much into super to do that and I have now been told that in July when I reach 75 I can no longer contribute to super either by way of salary sacrifice or any other way. I think this sucks because if your well and healthy need to work or want to you should be able to put as much as you like to keep you if you want to retire.
*Imagine*
14th Feb 2017
11:41am
Quite right OG. A National retirement and invalidity scheme should never have been privatised. Where there is a pile of money, there will be a swarm of undesirables trying to get a cut. Where are the trillions of super dollars being invested, are they invested ethically, are they invested in a manner that will improve the development of the Nation etc.? Ask why individuals who have sacrificed income to pay the same amount to different super providers end up with substantially different retirement incomes. Is this what we want? The billions of dollars in fees and insurance should be used to benefit the Nation, not to build bigger sky scrapers to house overpaid executives of super schemes.
A National scheme should be run by the Government to ensure that all monies collected are invested in National development to benefit the Nation as a whole, and each individual in the nation should be treated equally upon retirement or invalidity. Lump sum management by individuals is a nonsense if we don’t know how long it must last. It is far more sensible to spread the huge amount of super over the population and give each person a reasonable income for as long as they live. It works in other countries, why not here? I imagine it is vested interests demanding their cuts. Nine percent would be more than ample for a National super scheme.
Old Geezer
14th Feb 2017
11:53am
I disagree as to me there is nothing better than a SMSF where I have control.
Paulodapotter
14th Feb 2017
12:40pm
Like insurance, you could be given an option to opt in or out of a privately run fund. I think "Imagine" has a point. We are too quick to privatise in this country where the public interest is at stake, eg., electricity?
Old Man
14th Feb 2017
11:53am
12% should be persevered with as the end result, when the system runs its full course, is that retirees will be much better off than those who retire with little or no super.

What is so special about the Grattan Institute that their opinion should carry any weight? As can be seen on this site, there are many and varied opinions on a range of subjects with a lot of the opinions being backed by good, sound and sensible arguments. Really, it's just one person's opinion when all is said and done.
Eddy
14th Feb 2017
12:17pm
Well said Old Man, I totally agree with you.
Unfortunately some people on this forum are so rigid in their opinions they resort to insult and vitriol.
Rainey
14th Feb 2017
5:18pm
Not if the government keeps milking the retirees who saved and stealing their savings. What's the point of a healthy super if it just deprives you of benefits those with no super receive, and positions you to have to mortgage your house to survive old age?
Old Man
14th Feb 2017
6:00pm
Sorry Rainey, I'm having a problem understanding what you mean when you claim that a government is stealing savings. What have I missed?
Old Geezer
14th Feb 2017
11:28pm
Old Man Rainey is going on about the change in the asset test again and thinks that it is nothing more than stealing the savings of OAPs. So taking that one step further the government has been stealing the savings of us self funded retirees for years now.
Rainey
15th Feb 2017
7:25am
Wrong, OG. The government has been stealing ONLY from those who cannot generate an adequate income from their accumulated assets. I have no issue with denying pensions and benefits to anyone who can generate an adequate income. I have a major issue with denying people who suffer educational or health or psychological disadvantage that prevents them achieving decent returns. It is STEALING to force people to drain their assets as punishment for having saved despite disadvantage.

I saw a classic case of this THEFT the other day. A guy who suffered hideously due to abuse in employment finally - after many years of neglect - was awarded some compensation. The intent was that it should cover extra living costs incurred because he suffered injury as a result of workplace abuse. But the government is taking it all back at the rate of $3 per $1000 per fortnight, because despite hardship he and his wife managed to save a modest nestegg and buy a home. They had a horrific struggle through life. They went without a great deal and worked two jobs, plus built their own home and furniture, working nights and weekends and all through holidays. They lived on home-grown veggies and made their own clothes. And now they are denied ANY reasonable benefit from the compensation that was INTENDED to pay for needed care in their old age and for disability aids, and the compensation he so richly deserved and was finally paid is WORTHLESS.

This couple cannot now continue to live as they used to. Their NEEDS have increased due to age and health issues, and they are now suffering for having worked hard and saved - denied the benefit the law courts deemed they were entitled to by greedy well-off mongrels like you, OG, who assume that only the privileged should enjoy a decent standard of living.

But if had spent all their savings on world cruises knowing they could somehow keep earning $60,000 a year, they would qualify for pension benefits. And some morons call that ''fair''.
Old Geezer
15th Feb 2017
9:51am
Yes Rainey that is very fair as they have enough capital to live on until they draw down enough to get welfare again. After all that was what the compensation awarded was to be used for.
Farside
15th Feb 2017
7:02pm
Old Man, I agree there are many and varied opinions on a range of subjects, some even many good, however I suggest the proportion of opinions backed by sound and sensible arguments is wanting overall. Further, the proportion of arguments backed by solid analysis by knowledgable is lower again and this is the why research from think tanks like Grattan Institute carry more weight than forum opinions, even taking Grattan's political leanings and funding into account. Before giving credence to forum opinions perhaps take time to question the motives, qualifications, experience and resources behind them.
Rainey
17th Feb 2017
8:58am
Wrong again, OG. The compensation WAS NOT awarded to substitute for the OAP. It was awarded to PAY THE EXTRA COSTS incurred as a result of an accident that led to disability. It was to make the recipient BETTER ABLE TO MEET THOSE COSTS. But he isn't. He's simply forfeiting income he would otherwise have received.

There is no way to justify this unfairness. You can continue your nasty, selfish rants forever. It doesn't make it right. It just shows your ignorance and self-serving attitude.

Yes, Farside, the proportion of opinions backed by sensible argument is wanting overall - largely because political bias and arrogance drives irrational refusal to consider facts that don't match with the assumptions of policy-makers and ''think tanks'' (that do very little thinking!) or because egomaniacs refuse to acknowledge privilege and want to maintain their social and economic superiority at all costs, regardless of the harm that attitude does to society as a whole.
Eddy
14th Feb 2017
12:04pm
Again the Grattan Institute shows their bias for big business in their attitudes. Contrary to what they say the Super Guarantee is paid by employers not employees. Keeping it at 9.5%, or even reducing it, is in the interests of business, increasing it to 12% would be in the interests of employees and government.
As one who is now benefitting from paying superannuation since I was 18 (I was in the Defence Force and it was compulsory, 5.5% from my salary and 5.5% employer contribution) I am strongly of the opinion that the contributions should be at least 11%, preferably higher.
If I was to suggest a change to superannuation it is that only a percentage of super savings be allowed as a lump sum and the balance be paid as a 'pension'. Although most people handle their retirement lump sum wisely there are a number that squander it and do not use it for the purpose it was intended, ie financial support in retirement and reduced dependency on the OAP.
Rae
14th Feb 2017
2:33pm
Fair comment Eddy. I also think that self employed and business people should pay a certain amount into compulsory super funds as well to ease the Nations welfare bill. I do not understand why only PAYG workers have compulsory savings applied.
Rainey
14th Feb 2017
5:16pm
Rubbish, Eddy. NOTHING is paid by the employer. Whatever it costs the employer to retain labour reduces the expenditure on other components of labour costs. No employer is going to just cop an increase in labour costs through raising the SG. They will cut wages and other benefits to compensate.
TREBOR
14th Feb 2017
6:23pm
All funds under the one roof, Rae, and all operated by the same rules. Let's see our politicians and public servants leap at that one. the cry that public servants are low paid and need this extra perk is nonsense - I was in the CPS and after one pay grade jump was just below AWE....

A good point about allowing the system to run its full 'lifetime' before hitting the panic button as this current government have - fifty years, not twenty five, and they might have an argument that not enough people have enough super.
Rae
15th Feb 2017
10:48am
Yes TREBOR I get your point but it would still only be PAYG workers having super taken from wages into that one roof. Business people and self employed do not have compulsory payments into superannuation.

They can spend how they like and always have the option of full OAP at the end.

I find this incredibly condescending. To assume workers need to be treated like children and forced to save but the big bosses are adults and have the freedom to suit themselves.

If they want to use all their income for mortgage payments they can.
Old Geezer
15th Feb 2017
11:46am
That's why a lot of people now work as contractors and not employees.
PIXAPD
14th Feb 2017
12:04pm
You can have a great retirement and not need much Super at all, with full pension and income stream to supplement.... no problems
Eddy
14th Feb 2017
12:34pm
Okay Pixapd, but that is exactly what the Super Guarantee was to address, to reduce reliance on the OAP.
The cost to the taxpaying population is increasing exponentially and will someday reach a point where paying the OAP becomes untenable. That when the s*^# hits the fan. The Super Guarantee is to wean us, and future retirees, off the idea that the OAP is the primary and/or only means of financial support in retirement.
Government, both Liberal and Labour, recognise this, the current push is to raise the pension age and change the assets and income tests. Future, and as yet unknown, changes are unlikely to be to the benefit of retirees unless we change our attitudes to OAP and Superannuation.
Rainey
14th Feb 2017
5:06pm
Yes, Pixapd, you can be a LEACH and a LEANER and brag about it. But some of us have more self-respect.
Old Geezer
14th Feb 2017
11:45pm
Good for you PIXAPD sounds like you are living like an OAP should and are grateful for it. Many others are not and it wouldn't matter how much they got it would never be enough.
Rainey
15th Feb 2017
7:05am
There's a difference between being ''grateful'' and being arrogant and contemptuous toward those who pay your way, OG. You are disgusting! You praise parasites who boast about living well off the taxpayer yet you condemn hard working savers who want to be treated with moderate fairness and allowed to enjoy the benefits they earned. THAT'S COMMUNISM and it destroys economies and lives. We fought against it, but now we are being infiltrated by COMMOs who PRETEND to favour capitalism.
Rainey
15th Feb 2017
7:13am
Of course Pixapd can live well on ''the full pension and income stream to supplement''. Much better than the poor old bashed up strugglers who saved enough to generate an income of maybe $25000 a year and get NOTHING ON TOP - not even rates and registration discounts.

That's where the system is WRONG WRONG WRONG.

Why should someone who saved up to $375,000 be supported at an adequate income with all sorts of concessions and allowed to keep 100% of their savings plus potentially enjoy a healthy level of return on their assets, when someone who saved twice as much is forced to drain everything they have to achieve a lifestyle nowhere near as comfortable as the couple who saved less? Anyone who condones such unfairness is a COMMUNIST, because that's the COMMUNIST philosophy: crush the working and middle class and ensure there are only the very rich and the very poor, and nothing in between. And there's no way to raise yourself up from hardship and enjoy a better standard of living than you were born to - unless you are among the very few who can get rich (usually through corruption!)
Old Geezer
15th Feb 2017
9:48am
Rainey if a couple has too many assets to get the OAP then they would be earning an income far greater than the OAP. I earn enough to live on $400,000 and have done so for many years now. At present the return is greater than my living expenses so is increasing in value.
Rae
15th Feb 2017
11:01am
Rainey that couple with the close to $800 000 should be able to make an income of at least $60 000 a year without touching the capital. They need a good accountant and financial advisor.

If the money is tied up in assets that produce no income then changes need to be made.

The recent changes mean buying those caravans, motorhomes, fancy SUVs, boats etc at retirement is no longer sensible but then the money saved in super was never for that stuff anyway.

Personally I'm surprised those industries have let the government get away with this but there you go.

Better now to hire or borrow what you need rather than owning it outright. The car sales will suffer but that is probably a consequence they can deal with.
Old Geezer
15th Feb 2017
11:27am
I agree Rae. These RVs not only depreciate but costs heaps to own and run. I know as I own one. Insurance and rego costs over $2000 a year alone. Yes I could get away with hiring one but the money tied up in mine would not make any difference to my lifestyle whereas those couples with close to $800,000 it most certainly would.

In today's market $60,000 is quite achievable on $800,000 and I for one would be actually a little disappointed with it knowing what I know is being achieved. Any good accountant and advisor should be able to achieve this or more.
Old Geezer
15th Feb 2017
4:58pm
ASFA puts this number required for seniors to enjoy a comfortable retirement as a lump sum of $640,000 for a couple or $545,000 for singles. This is assuming the seniors draw on an Age Pension to maintain an annual expenditure of approximately $58,784 (couple) or $42,861 (single).

https://www.oversixty.com.au/finance/retirement-income/2017/01/how-much-money-you-need-for-retirement/?mc_cid=27a84e8579&mc_eid=07061b6ef2
Rainey
17th Feb 2017
8:47am
Rae, I'm sure many with $800,000 in assets can achieve a $60,000 a year income, but at current interest rates, some will be achieving less than $25,000 even if they have minimal non-returning assets (ie furniture and car).

The point that OG refuses to acknowledge, and the government is conveniently ignoring, is that the less advantaged don't have the capacity to invest in ways that achieve 8% or more. So the system discriminates heavily against the disadvantaged - the sick, disabled, psychologically challenged, mentally incapacitated, and those whose earlier traumas or crisis have rendered them incapable of dealing with risk.

You say people need a good accountant and financial adviser. Such beasts are hard to find in my experience! But let me tell you about a friend who recently lost the pension. Raised in an institution, then bullied in the army and denied his pay for the first two years of work, he is mortally terrified of authority and has a paranoid belief that everyone who is ''part of the system'' is out to hurt him. He has no capacity to trust anyone to advise on finances. He wants his money safely in the bank. He is now forced to drain away his life's savings, and nobody who doesn't know him well could hope to understand how hard it was to accrue those savings or what they mean to him. So he lives on $22,500 a year, while well-educated people who lived the high life and have no idea what kind of hell this man endured live well on the taxpayer. He feels cheated. I sympathize. And I am disgusted that people like OG can't stop and consider that the system IS unfair to people like him, and support calls for reform that would benefit ALL OF US - THE TAXPAYERS MOST OF ALL.

My financial adviser says a low risk strategy today is doing well to achieve 7%. With fees and management costs taken out, and allowing for a meagre $66,000 in furniture and car, that means you have to achieve 8.6% - 1.6% above the low risk strategy average. A lot of people couldn't hope for that level of return in today's environment. Yet our system pays pensions (and thousands in concessions) to those with a few thousand less who can earn 10% return. And some call that fair!

We claim the system is geared to benefit the disadvantaged, but it isn't. It's geared to plunge more people into hardship and retain a social structure that suits the privileged like OG, because it enables them to look down on people who aren't as privileged and to crush those who try to climb.

OG, ASFA's figures are AVERAGES. They are theoretical. They pay NO attention to individual circumstances, and therefore they are NOT RELEVANT, unless your goal is a communist state in which only the privileged are allowed to prosper, the middle class and upper working class are crushed, and the poor are fed crumbs and told to be grateful. They also show that the system discourages endeavour, because saving $816,000 makes you WORSE OFF than saving $640,000. How dumb is that?

We HAD a prosperous nation in which effort and honesty was rewarded, but that's been destroyed at huge cost. And continuing to make it worse is going to mean continued social and economic disaster.

We need to join together to demand sensible reform, for our children's sake - so they have a hope of a decent retirement.
Hasbeen
14th Feb 2017
12:05pm
With these articles all favouring more money to the Super industry, [rip off more likely], it is looking like this site is a captive of the super industry, or makes too much of it's income from their promotion.
Paulodapotter
14th Feb 2017
12:46pm
As imagine said - privatisation of superannuation has led to a great deal of disparaty and inequity, just like other public interest institutions like energy.
Eddy
14th Feb 2017
1:20pm
Maybe the answer is not-for-profit industry super funds. I think it unlikely, and undesirable, that the management of superannuation should be exclusively in government hands. A diversity of industry funds investing in the future of Australia would have multiple benefits such as providing secure retirement incomes, funds for investment in large infrastructure projects and generating jobs for Australian workers.
TREBOR
14th Feb 2017
6:28pm
Agreed, Eddy, if you read my post. Not convinced on the investment in infrastructure etc - more likely to invest for short term gain than long term stable return such as a new Snowy scheme.

A national scheme could do that without needing to line up the troops from each fund.... just saying.... befehlen ist befehlen....
cdbstock
14th Feb 2017
12:08pm
4B2 - Well said
A form of adequate compulsory super is essential -Keating started it but now the rate has to be increased even if employees have to meet the cost (suggest a gradual increase from 9.5% to 15% by next 2 federal elections)
MITZY
14th Feb 2017
1:22pm
When Keating introduced compulsory superannuation, it was to increase gradually over time to reach 15% years ago. Coalition government has left it stagnating, I guess their buddies had a hand in that.
Rae
15th Feb 2017
11:07am
Can you have adequate compulsory super when only PAYG workers do it and the median wage is $43 000?
Rainey
17th Feb 2017
8:50am
The really silly part is that people on high wages get massive huge tax concessions to build big superfund balances, and people on low wages get $0 concessions, or actually pay more tax on their super contribution than they would if it was included in their take-home pay.
Old Geezer
17th Feb 2017
11:44am
That is about to change on 1st July Rainey.
Rainey
20th Feb 2017
8:32am
Rubbish, OG. The changes are minor tweaks that do nothing to address the inequity that is costing the nation a fortune.
KSS
14th Feb 2017
1:48pm
For years we have been told that relying on the amount of compulsory super is not enough for a comfortable retirement and that we should be contributing to it over an above the compulsory amount. Now suddenly it seems the Grattan Institute has the opinion (and it IS only an opinion) that the current compulsory amount of 9.5% is more than enough to fund retirement even into the future. And fund retirement it is for NOT deposits on houses or anything else! What assumptions is GI making about wages growth to keep up with inflation? Over the past 5 years wages have stagnated along with the freeze on increasing super contributions at 9.5%. It seems to me that the general direction of all the changes to super (actual or opined) are with the intention to lower the standard of living of older Australians to the lowest possible level, by limiting the individual's ability to improve their lot. And this seems at odds with the clear desire to get as many people as possible off the aged pension. I have no issue with that intention but why then punish those who comply?
TREBOR
14th Feb 2017
6:29pm
That's why we ignore the Grattan Institute and other sink tanks........
Not a Bludger
14th Feb 2017
4:34pm
All of you should tuck in the back of your minds that the Grattan Institute is no more than another group of rent seeking lefties which is populated by a heap of people none of whom have ever had a real job, earned a quid or added any value to anything.

Superannuation, so-called, should not be compulsory but should be the responsibility of each person/family to provide for there old age.

You all forget or don't know that when Paul Keating introduced compulsory superannuation, his deal with the unions was that if they shut-up at let him do it, then he would legislate to let them set up super funds which they could control and, hence, give them (what was then undreamed of) funds and financial power and controls - and so it has proven.

Worth noting that the unions are still as crooked as they were back in Hawke and Keating's day.
TREBOR
14th Feb 2017
6:31pm
Unions are no more crooked than other business and political entities are, NAB.... sorry 'bout that. I think you are locked in the Jimmy Hoffa thing of accusations of raiding the Union super fund..... the likes of Thomo and his group are not representative of Unions....
Rainey
14th Feb 2017
5:04pm
''what’s wrong with working hard all our lives so we can enjoy a comfortable retirement?''

Everything, according to the stinking government and it's supporters. Save for a comfortable retirement and unless you can save well over $1 million, they take it all off you. Now they are talking about taking the family home as well. Apparently, we are not ALLOWED to aspire or work towards a comfortable old age.

What the Grattan Institute fails to acknowledge is that many retirees WANT AND/OR NEED a higher standard of living in retirement. I sure wouldn't want to have to live in old age as I did during my working life - knocking myself out to do every kind of home and car and appliance repair myself, sew clothes, grow veggies, and never have a meal out because I couldn't afford it.

These idealistic overpaid fat cats are stuffing up the world with their stupid assumptions and wild theories. They should get out in the real world and learn what life is like for others - and shut their mouths tightly until they are educated.

But while we on lack of appreciation of reality, the statement that employers pay the compulsory super contribution is really dumb. Employers pay what they are willing and able to pay for labour. If they have to put more into super, they pay less in wages. That's elementary. They can't magically INVENT money to pay workers more just because the compulsory super contribution rises. Everything is trade-off.
TREBOR
14th Feb 2017
6:32pm
Work? Where? Commute to Asia?

Been saying for a very long time that without employment, there can be no remedy for the increasing burden on social security.
Old Geezer
14th Feb 2017
11:33pm
So Rainey you expect the tax payer to pay for a better standard of living in retirement than what you had while working? I certainly don't.

OAP should be only for those with no other means of support to provide the basics of life not the luxuries of life. If you want more than the basics of life then you save for them and spend your capital in retirement on them.
Rainey
15th Feb 2017
7:01am
OG, you are disgusting! I did NOT mention the taxpayer. I referred to wanting a higher standard of living in retirement. But YES, the taxpayer SHOULD fund retirement FAIRLY. If the taxpayer pays people who gambled and partied their money away during working life, then equally they should pay people who saved because they understood they would have higher needs in retirement.

Those of us who struggled through working life, getting by through doing things we would have no hope of continuing in old age NEED AND DESERVE an adequate income in retirement to achieve a modest comfort.

It seems YOU content that if someone suffered major hardship and disadvantage during their working life, that suffering must continue in old age. What a vile and nasty assertion!
Old Geezer
15th Feb 2017
9:46am
Very few people if any who struggled through life would not have any where near the amount of assets that would affect their OAP entitlements. If you have that amount of assets then you haven't struggled or you have won the lottery or got an inheritance. So those that suffered major hardship and disadvantage are well protected by the welfare system. That seems very fair to me.
Rainey
17th Feb 2017
8:10am
How the hell would you know who struggled to get what or how, your IGNORANT person, OG? You are an arrogant, ignorant know-all who knows NOTHING AT ALL, and you are TOTALLY WRONG.

There are plenty of people who struggled through life but managed to save enough to impact on OAP entitlements. They saved BECAUSE they struggled early on and didn't want to struggle again.

The cheats and the manipulators are looked after by the welfare system - those living in million dollar+ houses and those who hid money in family trusts or gave it to their kids. NOBODY else is looked after by our grossly UNFAIR and DISGUSTING system that is destroying the nation by killing off incentive to do what's good for the country. The disadvantaged don't receive nearly enough, and the system discriminates against the honest and responsible.

I am still working so not affected by the OAP rules, but I challenge ANYONE to evidence having a harder struggle than my partner and I had, yet we saved very well without EVER inheriting a cent, winning a cent, or being given a cent. We accrued enough that we probably will never get a pension, and we did it on minimal wages, despite paying out over $100,000 in medical bills for a special needs child, and despite many periods of terrible hardship due to illness and my partner having to retire early disabled.

And we are far from alone. I know dozens of SFRs who endured major struggle and never benefited from wins, gifts or inheritances. I also can point to thousands who had big handouts and high wages who have NOTHING (or very little) in retirement. Assets in retirement are NOT an indicator of opportunity or benefits in earlier life.

The system is WRONG, OG, and SO ARE YOU. And the wrong is destroying this country.
Old Geezer
17th Feb 2017
11:43am
Rubbish Rainey.
Rainey
20th Feb 2017
8:40am
What a dumb response? Is that really the best you are capable of OG? Obviously you are WRONG, or you'd be able to respond with facts and intelligent argument, but you can't can you? Because you a just a troll with no capacity for original thought, pursuing a selfish objective.
Old Geezer
20th Feb 2017
6:50pm
I don't know one SFR that has had to struggle to become one. I do know lots of OAP who have found every loop hole they could just to get the OAP.
TREBOR
14th Feb 2017
6:14pm
Much as I oppose strong centralised government of any kind - it seems to me with the current shamozzle of private little firms here and there and everywhere and all needing to feed boards, ceo's and such as well as duplicating staff - and with the current entrenched cost structures of fees for service and insurance - the whole deal would be better amalgamated under one roof and controlled by an elected body independent of any political party.

Such a body should receive a small stipend and some expenses for genuine work - not just some catch- few lazy hundreds of thou for sitting down once a week - and should be drawn from all sectors of the community, with at least one SFR or pensioner on the board.

This fund should include the Futures Fund returned to our shores,to stock the larder as well as destruction of the nation-deproof politician and public servant retirement packages, and bring those under the same roof as everyone else, sop as to make those persons more aware of the shortcomings of bad and false policy, national or departmental, as well as taking over the current body of funds and incorporating them under one roof.

Employees of such organisations would be bound by strict rules on handling money and expenses, and would have a mandatory ten year sentence for misuse of funds, plus confiscation of property to recover loss.

That is the only way I see out of this current morass, that is creating such angst for so many people at this time.
Old Geezer
14th Feb 2017
11:42pm
Why isn't that future fund invested in our infrastructure instead of some off shore pharma company that changes our government heaps for drugs?
MICK
14th Feb 2017
6:44pm
You miss the point Leon that there are and always will be the haves and the have nots. It matters not what you increase the superannuation guarantee to because some will always not have anything in their accounts at the end of the day.
The other issue is that government have been eying off superannuation for years wanting to get their hands on some of the loot. My bet is that some time in the future the industry will be nationalised and the money will go into consolidated revenue and become a part of the pension system.
The Grattan Institute is likely batting for its high wealth members, not the nation, as these people will cream off the most as they currently already do.
What we need is proper allocation of taxpayer money rather than huge unaccountable waste and class warfare which has been on since Abbott got into office. Anybody watching the form closely and looking at where the money is being sent would see that. The Grattan Institute needs to be restructured so that it reports in an unbiased form rather than pursue the government's predictable rhetoric and money transfer to the wealthy.
DaveL
15th Feb 2017
9:06am
Here's a theory. Retired couple receiving full aged pension, own home, have $120,000 in fiancial assets. The new rule on defined benefits super (for $1.6 million limit) is that you multiply the annual payment by 16 to ascertain the lump sum value of your pension.
In the above case, Pension $34.382, benefits like rates, rego etc $3000 and interest on $120,000 @ 2.5% equals an annual income of $40,382. Multiply this by 16 = Deemed assets of $768,118. This is not much less the the maximum figure for assets of $823,000. So, this is the governments attitude on equity.
Old Geezer
15th Feb 2017
9:42am
Without looking it up I believe the defined benefit pension only is multiplied by 16. $34382 x 16 = $555,112. You then add any other Centrelink defined assets you have to this. Suggest you look it up.
Rae
15th Feb 2017
11:30am
It is a joke Dave. The 16X is over twice the amount of any lump sum and the discounting of non concessional amounts is almost in the double tax thing if there was any tax anymore.

That's the problem right there in Australia. Only a few dumb bunnies are paying much tax. Anyone with a decent accountant and advisor certainly isn't.

Not even the defined benefit people who did pay full tax before contributions because those funds closed years ago.
Rainey
17th Feb 2017
8:26am
My financial adviser put this to me last week, Davel, only he worked on a couple with $300,000 in assets, and showed that they are way better off than a couple with $816,000.

The 16X might actually be 22X because the pensioner couple will, on average, receive an OAP for 22 years. So the OAP is worth $756,404 PLUS concessions etc. The pensioner couple, even with no other assets or income, is theoretically better off than the couple with $816,000 in assets.

Stupid policy by a government that either is totally inept or determined to destroy the economy! What's the point of working and saving if you are going to be no better off in retirement than if you didn't bother?

The reality isn't quite as simple, of course, because the couple with $816,000 will draw a part pension down the track, but there is a strong incentive to reduce savings, because they simply don't benefit you.

I know couples who are giving their houses away to their kids with agreements that they can live in them until they die. $300 a week extra pension as a result. Where's the incentive to do what's good for the nation? It's idiotic policy!
Old Geezer
17th Feb 2017
11:37am
Rubbish Rainey the OAP is on approx 4% return on $816,000 so if that financial planner can't double that there is something very wrong and he needs to give his job away.

Give me the $816,000 any day as I know I can earn much more than the OAP.
Rainey
20th Feb 2017
8:31am
WRONG AGAIN, OG. You can't do math can you? Losing $3 per fortnight on every $1000 of extra saving equates to 7.8%. And it's more than that if your loss means you are kicked off the pension completely because you can lose up to an additional $5000 in concessions and pensioner benefits.

It's got NOTHING TO DO WITH WHAT YOU CAN EARN.

It's about the MAJORITY of people, not one arrogant egomaniac..
Old Geezer
20th Feb 2017
11:12am
It's about time those benefits were only given to those on the full pension then as it is simply not fair that the rest of us have to pay more for many things just so they can get a discount or pay nothing.

I've heard that it is being considered for the May budget so I hope they do it.
looney
15th Feb 2017
2:13pm
Yes 4b2 the people I talk to think super for working people is dead in the water due to the asset change by our present Federal Government.At this time it is being used as a tax dodge by the wealthy, how out of touch is this mob
looney
15th Feb 2017
2:30pm
Perhaps Not a Bludger is O.G love child WOW.
Old Geezer
15th Feb 2017
3:01pm
Nope I'm a one woman man so it just isn't possible looney. What about you?
cdbstock
21st Feb 2017
6:46pm
Leon - tks - food for thought
On balance considering our huge pensions (& rapidly increasing) cost to the budget the Keating compulsory super contribution should be increased gradually each year (say by .5%) to ensure pensioners have a reasonable living standard & to reduce the burden on the budget


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