New super limits will force more Australians onto the Age Pension

Under new super limits more Australians will be forced onto the Age Pension, or to work longer.

New super limits will force more Australians onto the Age Pension

Speaking at a Women in Banking and Finance lunch last week, former federal treasurer Peter Costello questioned the Government’s plan to limit tax-free superannuation savings to $1.6 million. As a result of the planned changes and low rates of return, Mr Costello predicted that more Australians would be pushed onto the Age Pension or compelled to work longer.

Mr Costello said that the Government has estimated a return of around $80,000 per annum from $1.6 million, the equivalent to around four times the Age Pension. "When you work it out, that is on the assumption of a 5.5 per cent return rate," he said. "That is what the Government thinks you are going to get. Does it really think that? It is issuing bonds at two [per cent]." The 10-year Australian Government bond fell to 2.2 per cent Monday, which is a record low.

"What is going to give in this situation? The first thing that will give is that you will run out of money and go back on the pension, or a part pension. That is what most people in Australia are going to do. The other thing is that many people are going to work for longer, beyond 65. They'll put off their retirement," Mr Costello said.

Mr Costello, who currently heads the $120 billion Future Fund, is engaged in open negotiations with the Government to reduce the fund’s long-term return target. "Does the Government want us to go after 5 per cent, which means we have to move up the risk curve quite considerably?" he said. "Or would the Government rather us preserve what we've made, and reduce the target so that we stay where we are on the risk curve? That is a big issue. Does the Government have an appetite for us to chase risk? I don't think so. But the incoming government, whoever it is, will have to come to grips with that."

Mr Costello warned Australians not to expect either the Government’s or the Opposition’s proposed superannuation policies to be introduced because of a lack of support from the Greens for either policy. "We have a plan A on superannuation and a plan B on superannuation, but what is likely to go through is probably plan C. We can't tell at the moment what it is going to be," he said.

Read more from www.afr.com

Opinion: An uncertain future for super

Retirees have once again been left in limbo as politicians fail to find common ground on the future of Australia’s superannuation system. Current polling suggests that neither major party will gain sufficient seats when forming the next Government, in order to be able to pass their proposed superannuation policy. This means that the governing party will need the support of the Opposition, or The Greens – who have already said they are not prepared to vote ‘yes’ on either proposed policy.

Essentially, Australian voters will be going into the next election with some idea of where both the Coalition and ALP stand on superannuation, however, neither party’s policy has a strong chance of successfully pass through both Houses of Parliament.

The future of Australia’s superannuation system is far too important to be left in the hands of a minority party or party deals. Although it’s highly improbable at this stage of an election campaign, perhaps the two major parties could agree on a bipartisan approach to superannuation?

Mr. Costello is correct to stress the lack of connection being made between the government’s expectations of how much retirees might earn from their savings, the current interest rate, and the government’s own deeming rates. In short, they anticipate retirees will earn at 5 per cent, the actual rate is closer to 2 per cent, and the deeming rate remains higher. Go figure.

What do you think? Are you worried about your superannuation? Do you understand the current policies of both major parties and the proposed future changes? Are you worried about the Government’s modelling figures highlighted by Peter Costello? 

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    COMMENTS

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    19th May 2016
    10:21am
    A pity Mr Costello didn't highlight the even more detrimental and thoroughly STUPID changes to the assets test, and how they will drive the costs of supporting the aged population through the roof.

    It's good to see him speaking out on this one, but he should speak out on the pension changes before it's too late to reverse them, because they are far more detrimental to the nation.
    GeorgeM
    19th May 2016
    11:51am
    Rainey, Spot on. It shows where Peter Costello's priorities lie - to protect people with assets in Super over $1.6Mil, when the revised assets test cuts out pensions much earlier ($823K for couples, not just in Super). Reverting the revised Assets tests from 1 Jan 17 should be the priority.

    Political parties need to do much better, so I am disappointed this article's Opinion piece suggests the major parties are preferable - when they have stuffed it so far. I say only vote for a political party / Independent who will make sure all Members of Parliament (current and past) have all special Pension entitlements scrapped, and replaced with the same Age Pensions as for all other Australians, both in terms of when it is available and how it is calculated.
    MICK
    19th May 2016
    2:13pm
    I suspect Costello is not telling the whole story and it may be that there is self interest here.
    So what is the difference between taxpayers subsidising super and the pension? Either way it costs. Personally I would think that giving the wealthy a vehicle whereby they can avoid the real tax system is wrong and any talk about bringing back the rorts is to the advantage of the rich whilst the rest pay.
    Leave things alone. I do agree about the assets test Rainey. It is set a bit too low.
    LiveItUp
    19th May 2016
    7:38pm
    The changes to the assets test was a good policy as couples with over $1million dollars in assets plus their house should not be getting welfare payments. Welfare is for the needy not the people who get it because it is nice to have. The government needs to take it further and address the biggest inequity in the assets test and that is add the house into the assets test.
    HarrysOpinion
    19th May 2016
    9:04pm
    I've decided to monopolise all the oxygen in this world and charge tax of 30% pa on all the assets people own plus 30% tax for inhaling the oxygen and 30% tax for exhaling carbon dioxide pollution, starting with Bonnie first. Hope she can survive on the residual of 10% of all her assets.Good luck!
    LiveItUp
    19th May 2016
    10:23pm
    Good you wouldn't raise much with my personal assets as I'm a penniless bum that owns nothing but controls everything.
    Anonymous
    20th May 2016
    1:30pm
    There's that oft repeated STUPID AND DISHONEST BS from Bonny again. Too dumb to figure out that $400,000 isn't $1 million. Poor fool!

    Plenty of people affected by the taper rate change ARE needy, Bonny. And plenty NOT affected are very well to do. And wrong is wrong, no matter whether dumb self-interested narcissists pretend it's right

    The aged pension is NOT welfare. It is, in effect, taxation - in a different form. You pay income tax if your income exceeds a given level. If your income is below a given level, you receive money from the State - reverse tax. It's ALL tax, regardless of what you call it. If people with certain means are entitled to tax concessions, then people with less means are also morally entitled to tax benefits. If they aren't wealthy enough to pay tax, then the concession should be in the form of a benefit - a rebate or pension.

    Fairness and equity demand that people are not discriminated against for saving, but assessed on income and need. But so does economic common sense. If you penalise saving, you destroy the asset base that underpins the nation's prosperity. You end up with a nation of needy leaners.

    It is mind boggling that some arrogant self-serving egotists are too self-absorbed to understand this concept. Thankfully, much smarter and more influential people DO get it. And eventually the government will have to get it. Sadly, we might all be dead and the country broke before the idiots in power wake up to their own stupidity.
    Anonymous
    20th May 2016
    1:31pm
    Mind boggling that some people are so illiterate that they can't read a table and work out that people with a very low value home and $500,000 in the bank are NOT MILLIONAIRES.

    STUPID, BONNY. TOTALLY STUPID. GO BACK TO SCHOOL.
    LiveItUp
    20th May 2016
    4:19pm
    If people are so needy then why is this change in the assets test affecting them? After all you have to have a lot of assets to be effected by this change. People with few assets actually benefit form this change. I really can't see what the problem I here other than people are getting their nice to have extras taken from them.

    I'm not stupid Rainey just a realist who knows what is really happening here. No school will teach me that.
    Anonymous
    20th May 2016
    6:04pm
    No Bonny. Not a realist. A realist understands that wealth isn't determined by assets. Age, health, education, and a thousand other factors of life circumstance affect wealth. One man with $800,000 can be 1000 times poorer than another with $200,000, depending on earning capacity, needs, future life expectancy, and many other factors.

    The asset test change was the thought bubble of illiterate simpletons who can't think things through, and it's approved by illiterate simpletons who can't think things through and can't see past the distorted view their blinkered vision presents.
    Adrianus
    25th May 2016
    12:04pm
    Rainey I think you will need to explain that a little better??
    I've seen wealthy people of all ages.
    I've seen wealthy people in good or poor health.
    I've seen wealthy people who are well educated and I have seen wealthy uneducated people.
    I fail to see how a man with $200k is wealthier than a man with $800k.
    Wealth is determined by level of assets. How else would you know if you were wealthy? Really Rainey?
    particolor
    19th May 2016
    10:34am
    Yes The Dooming Rates are to High ! :-(
    andromeda143
    19th May 2016
    11:07am
    Surely, if Mr Costello is right, then the $75000 cap Labor wish to apply is fairer, as it does not specify earning rates. $75000 earnings are plenty high enough for the wealthy to live on. However, it does not do anything for the people at the low end (part pensioners) who now are having asset curbs placed on them as well as being penalised for leaving the country for more than six weeks.
    particolor
    19th May 2016
    11:25am
    Dear Nearest Galaxy
    One day in the distant future the Milky Way Galaxy will consume the Andromeda galaxy and your people (Serfs) will enjoy the same Benefits that our Benevolent Government provides us with..TAX TAX TAX :-) :-)
    Anonymous
    21st May 2016
    11:37am
    Of course the $75,000 cap Labor sought to impose is fairer, andromeda143. But the LNP don't want ''fair''. They want ''confiscate from workers to give to the rich''.

    The cruel assets test change leaves some battling retiree couples with as little as $12,000 a year, and takes EXACTLY the same amount from couples who earn $80,000 a year. And of course the Bonny's of this world who earn high returns think that's fair!
    almost midnight
    19th May 2016
    11:35am
    As a single parent I have worked long and hard for all the family commitments...finally some time/money to put aside for myself for retirement..oopps the rules have changed again..looks like I will be working until at least 67...70...75...maybe 80
    Nanday
    19th May 2016
    11:57am
    almostmidnight - and when the changes force a bulge of senior workers into a workplace that is already biased against older workers, how will they get jobs at age 70 or older? It's an insane way of thinking, that just by changing the age limit older people will continue working. I suppose it will force a large group of these onto unemployment benefits. Or is the government going to be paying to retrain 75 year olds so they can be more competitive in the job market?
    ex PS
    24th May 2016
    12:05pm
    Good news/Bad news, you probably won't be on a pension but you probably will be on the DOLE.
    If you are lucky enough to keep your job your grandchildren will probably be on the DOLE.
    The economy will stall because no one will be moving up the employment ladder with people in management positions not moving on. We are looking down the barrel of state sponsored poverty, which will be good for ig business because it will provide a very cheap labour force.
    Saalbach
    19th May 2016
    11:40am
    It's a worry that the Future Fund considers a target of 5.5% too much of a risk. My very large super fund has been averaging over 7% for the past 20 years, even though we had the GFC and other hiccups. Maybe they need to replace Mr Costello with someone who can actually manage money?
    The article says that super is too important to leave in the hands on the minor parties - WHY???? Maybe they are the ones that might come up with a sensible, workable solution. ALL matters considered by Government should be multi-partisan - all elected members should consider the merits of all proposals, put aside their respective party's biases, and vote for the good of all of us, not themselves. The minor parties are probably more capable and willing to do this than the major players.
    Tom Tank
    19th May 2016
    11:57am
    Good points about the minor parties.
    Both LNP (I include the Nationals as part of this group) and the ALP carry significant baggage and are beholden to certain parts of the community.
    It does appear that people like Costello, on his Parliamentary pension, does live in quite the same world as us ordinary mortals.
    The vast majority of Australians would be very happy on $80,000 a year retirement income. Even half that at $40,000 would be more than most of us have and it is NOT down to smoking, drinking and gambling.
    Anonymous
    19th May 2016
    12:01pm
    What we need is a government that can understand math and money management, Saalbach. The self-interested incompetents we have now are destroying the nation, and our lifestyle with it.
    HarrysOpinion
    19th May 2016
    9:15pm
    Too right Rainey. I often say to myself that there are too many ex-solicitors, law barristers as MPs who only think in terms of "$400 in blocks of 6 minutes". It's the only math they know.
    smoky
    19th May 2016
    11:53am
    Superannuation is a rort, only pollies benefit from super, the average working person will never be able to survive on super and I think particolor is correct when refering to the "dooming" rates, they were approved by pollies who have no concept of what it is like to work hard and struggle to get nice things only to be told by some bureaucrat to sell them or lose out on benefits, I appreciate that super is meant to prop up our lifestyle in retirement but the prop is bending with the weight from all the constant changes.
    Nanday
    19th May 2016
    12:02pm
    My issues with these proposed changes is twofold - firstly, they should be grandfathered. As a self-funded retiree, I counted on the rules under which I did my financial and pension planning to remain in place. Now they have become a shifting sand. What next? Once they have established a precedent for backdating changes, everything becomes uncertain. My second problem is the cap placed on contributions. We have the opportunity now to encourage and allow people 50 and younger to put away enough super that the majority will be self-funded, thereby removing a future financial burden on taxpayers and the medical system, since retirees who are sufficiently self-funded will have enough to pay for their own private health care. The government is selfishly thinking of short term tax gains by lowering the contribution limits. Shame on them. They will create yet another generation who are reliant on the aged pension.
    Phil1943
    19th May 2016
    2:21pm
    As another self-funded retiree I know what you mean. I've always abided by the rules, whatever they were, and now find I'm guaranteed of running out of capital around the time I'm 83 or so (10 years away).
    Sydney's an expensive place and costs of such things as water, power, rates and food are all going up. And no discounts for those trying to live off an SMSF.
    At the same time it seems that getting the age pension is going to be made harder and harder. Does this mean, and I'm worried, that when we run out of money in our super funds we won't have a pension of some sort to fall back on?
    I have hopes that this current batch of neocons will go in July and be replaced by someone with a more friendly approach to seniors. I just wish I knew which mob of would-be rulers that might be so I could vote for them.
    particolor
    19th May 2016
    2:39pm
    They haven't been Invented yet ! But hang in there, that Light at the end of the tunnel might not be a train coming :-)
    Anonymous
    21st May 2016
    7:27am
    Nanday, I think this government is determined to grind all retirees down to basic aged pensioner level.

    But the superannuation changes are nowhere near as draconian and unfair as the pension asset test changes though. At least you can maintain a super balance high enough to generate a healthy tax-free income. The asset test changes leave people with incomes as low as $12,000 a year for a couple, and forced to drain their savings in early retirement. While those with high super balances get huge tax benefits, and the less well off get a pension, those caught in the middle get nothing. They are effectively double-taxed - charged tax on savings they have already paid tax on - OR taxed on their investment income at a rate of up to 320%.

    The unfairness of the system is horrific. It favours the privileged who can earn higher returns on their income. It persecutes those who saved for particular goals - such as a health procedure or home renovation or a special holiday - depriving them of needed income until they draw their savings and use them. It is harshest on the sick, disabled, poorly educated, and those whose earlier lives have made them risk averse or compromised their ability to trust. It favours those who over-invest in housing and makes it very expensive to downsize in retirement (compounding the housing affordability problem).

    This government has totally lost the plot. We have a treasurer who is totally incompetent. We have a prime minister who is involved in filthy tactics to transfer the blame for his massive NBN stuff-up to the other side. And we have MPs and Senators who have no respect whatever for the aging, let alone an ounce of empathy or compassion for those who face major challenges in old age. And we have a greedy, self-serving, me-focused society that endorses any change that doesn't hurt them and doesn't care a hoot about the unfairness of policies or the cruel hurt them cause to the victims of the governments vile attacks.

    I wonder what it will take for retirees to end their selfishness and unite to demand fairness and respect for all.
    ex PS
    24th May 2016
    12:34pm
    As a self funded retiree I must confess that the current batch of changes will not have much of an impact on me financially.
    The real concern is that we seem to have a governemt that has no problem with making changes to the Super system whenever they need to make up for shortfalls in their mismanagement of the economy.
    As they have proven, this government is addicted to helping themselves to retirees money in order to find funds to apease their political backers.
    It will become easier and easier for them to strip funds from retirees until it gets to a point where we end up with nothing.

    I urge all reirees, let us not skulk off into the darkness to dissapear with a whimper, let us make the next election Independant day and show the eslablishment that we are not the soft target they think we are!

    We may not achieve a great change in the way the government sees and treats us the first time around, but we can give them a hell of a scare, vote Idependant and put the LNP and Labor parties last or second last depending on which you feel is the lesser of two weavils. In unity their is strength, retirees united can make or break governments.
    JAID
    19th May 2016
    12:05pm
    The Future Fund does need to remain in low risk territory. That is unlikely to be 2% or even near it most of its time. 3 or even 3.25% should be realisable without considerable risk.

    If any think that 1.6 million is not a considerable sum I don't think they appreciate the associated factors or the more likely low risk return. At 3%, ones retirement income would still be well above the pension. It does need to be because pensions have a number of associated costs covered but it remains in excess of the aggregation of these. The associated factors include:

    -Historically short male lifespan after retirement
    -The capacity (though restricted,) given longevity, to draw on capital
    -That tax free savings cost the entire community

    Given these, we, the community as a whole, may well be better off relying on pension or related supplementary income to deal with this area rather than expect fully funded retirement for the long term. Typically, only those few who live in retirement for a term beyond the mainstream would require this supplementation.

    If we think that use of pensions in retirement is somehow piteous than we fail to understand that a society combining some of each, capitalist and socialist principals inherently cannot maintain income equity (if any can.) Income distribution is not and likely cannot be completely fair. Indeed, relative variations are integral to the nature of the economic growth we seek.

    My only reserve in relation to favouring limiting of the cap at least to 1.6m lies in the appreciation that when government has money it usually seeks to spend it (and more.) Limiting the cap increases tax receipts. Government employs at rates that are not sustainable in the wider community, it lavishes funds right across its infratructure on people, places, things and services. Restraint and government do not appear to go together even those that preach restraint abuse the time people commit to production.
    Nanday
    19th May 2016
    12:21pm
    Jaid, I'm not sure what data you refer to when you state that there is a historical short male lifespan after retirement. An article (2014) in the Australian stated:

    "AUSTRALIAN men have the third-highest life expectancy in the world, while the nation’s women come sixth globally, according to the World Health Organisation.

    But Aussie women are expected to live 84.6 years on average, compared with 80.5 for men, with the female lifespans being longer across the world."

    Calculations of the number of people living to 100 or older by 2055 range from 40,000 to 78,000.

    If a man retires at age 65 in reasonably good health, he is likely to live to over the age of 80.
    Retired Knowall
    19th May 2016
    5:54pm
    Lets not forget that the $1.6M cap is for each person, therefore a couple that has planned correctly can have $3.2M.
    The cap does not make sense, better to tax account earnings over a set limit. (Labor proposes $75K)
    LiveItUp
    19th May 2016
    7:42pm
    My super fund would make a lot more that $75,000 a year on a balance of $1.6 million if using my current rate of return per year. I see that $75000 as very restrictive with very lazy assets.
    Retired Knowall
    20th May 2016
    9:04am
    All the more reason to Tax the Earnings over $75K.
    Super was never meant to be a Tax Haven, it was always meant to be a source of retirement income.
    You have a short memory which doesn't suit LIARS Bonny.
    Your previous posts have stated that you have very little in Super and you have your money elsewhere.
    Anyway, $75K tax free with minimal tax on the balance is still a good deal.
    LiveItUp
    20th May 2016
    12:19pm
    Agree I only have a small proportion of my wealth in super as it's just a tax free structure to earn income for me. You don't need a big balance in your super fund to earn $75,000 a year. That's why I prefer the $1.6 million cap as one is not restricted by the amount they can earn.

    Just because super was meant to be a source of retirement income does mean that's how it should be used. The rules don't stipulate this.
    Anonymous
    21st May 2016
    7:39am
    Bonny, are you capable of writing a post that isn't focused on Bonny, and isn't full of ME and i? It's the sign of a total narcissist when you are always ranting about yourself and too arrogant to consider the issues objectively and without personal interest.
    older&wiser
    22nd May 2016
    12:37pm
    Bonny - are you really that dumb? Do you even know what crap comes out of your mouth? Here you state -
    My super fund would make a lot more that $75,000 a year on a balance of $1.6 million if using my current rate of return per year.

    Yet in another of your rants you state -

    Good you wouldn't raise much with my personal assets as I'm a penniless bum that owns nothing

    So you are saying that you regard yourself as penniless because 'my super fund would make a lot more than $75,000 a year'.
    Rainey - I totally agree with your statement. I'm a fan of this site - but Bonny and her narcissist rants are a REAL turn off
    Alex
    19th May 2016
    2:17pm
    Yes indeed Rainey where was Peter Costello when conditions were changed for people with a fraction of the lump sum he is talking about and low defined benefit pensions?
    The effective advocacy for people with high income and assets compared to that for those with low income and assets is staggering. A biblical quotation (out of context of course) covers this aptly 'he who has little, even that which he has will be taken away from him'. It fits the whole debate around superannuation. Those who have low asset super accounts are to have have them run down quickly courtesy of the Greens and LNP and people who have low to average defined benefit pensions have their incomes slashed courtesy of LNP and Labor with vultures lined up in the wings to take their homes as demonstrated on Your Life Choices. After paying a life time levy for a pension they have had the proceeds of this levy stolen and get nothing other than derision in return, facilitated by a complacent and complicit media.
    Rae
    19th May 2016
    5:59pm
    It is the propaganda Alex.

    For decades the cry has been," Defined benefits are wonderful. How lucky those people are."

    This propaganda is firmly believed because the media has no idea how much after tax income was needed to be contributed and how absolutely appalling the investment returns.

    A thorough investigation of defined benefit fund returns would rake up some filth I'm sure.

    It's as Nietzsche said,"I'm not upset that you lied to me, I'm upset that from now on I can't believe you."

    And that fact is true. You can't believe a word they say.
    Anonymous
    20th May 2016
    1:16pm
    Today I was asked if my comments on the taper rate change could be used for an article to try to motivate thousands of members of an investment advisory group to lobby the government to recognize the flaws in their policy. It's taken a lot of persistence to get attention, but clearly persistence pays. Now to wait for the article to appear and hopefully use it to rally more support to demand reform.

    I really don't think many people are smart enough to get how damaging these changes were and how grossly unfair. There is just too much self-interest and not enough objectivity. Bonny keeps ranting about it being a good change, but boasting about her affluence. Disgusting! How can people be so cruel and arrogant - and so ignorant as to deny obvious truths? But I'm seeing a lot of this from bigoted LNP supporters. They have an ''I'm okay, stuff you'' attitude to the world, and they blindly endorse anything as long as it's LNP and regurgitate blame messages about the Opposition without verifying anything or acknowledging the good things Labor has done or the bad things the LNP has done. Such political blindness is contemptible. No wonder the country is in a mess!

    Then there's those who have too little to be impacted by the policy, who seem to just look at others with green eyes, instead of considering the facts. They foolishly think ''If you get less, I'll get more'' (which is the lie Morrison told to sell his policy - but it WAS a lie!). They can't see that this attack on pensioners represents a gradual social change to reduce pensions across the board and hurt ALL aged persons who don't have well over a million dollars stashed away. They have now attacked the Energy Supplement. They are gradually chipping away at pensions. Watch out for the next cruel blow! It will be a whopper if the LNP is voted in again.

    As to the taper rate change, we need a concerted attack on both the Government and the Opposition highlighting the serious mistake the government has made and the grave problems that will result, and DEMAND review.

    It's not greed or selfishness to make this demand. It's not about giving pensions to folk who don't need them. It's about a sensible, fair, economically sustainable pension system that serves the needs of the nation without undue burden on taxpayers.
    ex PS
    25th May 2016
    5:26pm
    Rae, the Defined Benefit fund I was in simply guaranteed that if I placed so much money into the fund I would receive an amount set by a certain formulae upon retirement.
    The formulae was based on my final salary multiplied by the number of years worked, it was good but I do not consider the result exhorbitant. In the later years of my employment people were encouraged to change over to or invest via salary sacrifice into an investment productivity scheme, this is where many investments stalled or lost money.
    In my state the Defined Benefit Super Scheme is being hased out with no new members being signed up, this has caused a large disparity between the two types of retirees, with many of the latter being forced to take part pensions. As far as better performance, my state government wants to release the extra funds generated by the Defined Benefit system because there is enough there to pay out all outstanding policies and leave a huge sum unused.
    Hairy
    19th May 2016
    3:09pm
    So what else is new let's face it none of the big two care one tiny bit about pensions.they are going to get theirs and that's all they care about.we are even paying them to rip us pensioners off.goverment of our country is a very sick joke.halal just to name one rort.there are many more they have all got their hands in the jar.
    mangomick
    19th May 2016
    3:10pm
    Morrison with the help of the RBA are trying to force retirees to take on more risk rather than keep their super in safe investments. But should a big crash wipe out those riskier investments then the Government is really going to struggle finding the money to fund all those self funded retirees who would then be reliant on a pension.They are taking a big gamble on the future of this Nation and on the Future fund that so many Public Servants will be reliant on.
    Anonymous
    20th May 2016
    6:01pm
    There will be more folk reliant on pensions anyway, mangomick, because it doesn't pay to save given the new pension rules. People will reduce their saving, (or hide their money under the mattress!)

    Many part pensioners are planning expensive cruises because they've worked out that spending $100,000 on a cruise gets them an extra $180,000 approx. in pension benefits over 10 years. No point saving when the taxpayer will fund your cruise and give you a big fat bonus on top!

    Only idiots would support this dumb policy change. (Must be lots of idiots in parliament!)
    Ruben
    19th May 2016
    4:56pm
    Super has ceased to be a financial savings tool & has become a political tool. Hasn't anyone noticed that in every new budget there is a change in the super rules & thresholds? Financial planning for super upon retirement now has become impossible. Super funds have been warning for the last 10 years that the young people are not putting enough funds away in their super accounts foe their retirement. Well why the hell would they when they can see the continual raiding of peoples super funds by the government. Why would they invest their money in an account for some else to take. Super has now become a joke. That is why 10% of people in super have pulled out of their funds representing about 31% of the money in the funds,to become self managers. Super is not the governments money its our/my money that I have earned & it has already been taxed several times.
    particolor
    19th May 2016
    5:05pm
    Don't be Stupid now people !.. Put your money in a Flexible Interest Bearing Term Deposit and Manage your own funds on call and with No Sticky Fingered Date Scratching Polly's touching it !! :-)
    And yes ! One Sentence :-)
    LiveItUp
    19th May 2016
    7:33pm
    Super to me is nothing more than a tax sheltered vehicle to hold a few dollars that earn a tax free income. It is too restrictive and uncertain for me to use it to fully fund my retirement. It is just one of the different strategies I use to fund my retirement.

    It was not designed to be used in this way and there is not a financial advisor in the country that agrees with what I do simply because they really don't understand that super is just a tax sheltered investment vehicle.

    Many people today don't save and super is a way of tax advantaged forced saving for their retirement. If you can save then the restrictive nature of super is nothing but an annoyance.

    Like everything in life if one learns the rules and then plays the game by the rules. The strategies I use to play the super game is not one of the strategies that is the norm.

    Does the $1.6 million worry me? No. I do however think that everyone should be allowed to put in as much as they like upt o $1.6 million. Does the $75,000 worry me? Yes.
    Anonymous
    20th May 2016
    1:47pm
    Is Bonny utterly selfish? YES. YES YES.
    Just because her income is high, she agrees with hurting people with low income and modest savings. As long as it doesn't hurt SELF-SERVING BONNY, it's ''good''. What a vile, despicable attitude!
    Theo1943
    19th May 2016
    5:40pm
    Good lord. Allow me to work it out slightly different to Tony Treasurer.
    Let me suggest that If you have 1.6M when you retire at 67 and get 3% interest,you spend $120K in the first year from the capital. In the second year you spend $75K plus the interest on the capital $119,400. Every year after that you take the interest plus $75k off the capital.
    Your income will be decreasing over time , but you ARE getting older. When you reach 86 your income will dip below $100K. When you turn 98.5 you will have run out of money and will have to go on the pension. I'm betting you don't make it that far.
    Retired Knowall
    19th May 2016
    6:00pm
    It's interesting that a report by APRA suggests that most Self Funded retirees actually save money in retirement, so with careful planning and financial management the capital grows year on year.
    Theo1943
    19th May 2016
    6:06pm
    My father retired at age 65 in 1980 with no Super (there wasn't any super then) and little or no savings. His only income was the age pension. He died this year aged 101 with over $100K of savings in the bank.
    Alex
    19th May 2016
    6:38pm
    Perhaps some of those 'savings' are the proceeds of the sale of a house. Not sure how you could save over $100,000 on a basic pension or even modest super, even if someone else paid all your bills.
    Theo1943
    19th May 2016
    9:18pm
    He lived his last 63 years in the house he built. Worked for wages until he retired. With 9 children, no scope to save. No one else paid his bills. About ten years ago he gifted each of his children $5000. All on the pension.
    mangomick
    20th May 2016
    12:42pm
    No doubt he lived well within his means ,a skill they need to start teaching in schools,and probably owned his own house and car. Probably also lived in a regional area and had his own vege garden for a lot of the time.
    Retired Knowall
    20th May 2016
    2:21pm
    Alex, my dear departed dad lived on the full pension and managed to save well over $75K. Lived modestly, more so than I would, but his motto was "Live Simply So that We Can All Simply Live".
    What he drummed into me was "It's not how much you earn, It's how much you spend".
    Mangomick, you are spot on, but who is going to teach the teachers?
    My Dad lived in the City, never owned a car, didn't drink, smoke or gamble, maybe there is a clue there.
    Captain
    20th May 2016
    3:21pm
    Retired Know all, we don't need to teach the teachers, it should be the parents who begin the teaching process.

    I taught my two children about saving money and compound interest when they were pre-school age. They did not understand immediately but within two years they asked me to explain compound interest again. Both now are in their early thirties and each own their own house. It may take time and effort but worth it in the long term.

    I do agree that finance and money management should be taught in school as well.
    Retired Knowall
    20th May 2016
    7:37pm
    You are right Captain, but there are too many Parents that haven't got a clue about good Financial Management. Just look at the generations of welfare dependants, unfortunately the apple doesn't fall far from the tree.
    You only have to look at some of the posts on this site claiming that it's better not to save and send your money so you can get the Pension....Brilliant advice.
    Alex
    19th May 2016
    6:54pm
    Yes Phil123 it is a struggle to cover the utility bills, council rates and basic living costs yet people like Peter Martin SMH assert that retirees have very few living costs and have money to burn. Peter Martin did a budget for retirees last year which seriously disparage retirees suggested that much of their money was spent on alcohol and included very little of the actual living costs that cannot be avoided. He argued that what APRA said was necessary for a reasonable life in retirement was grossly exaggerated and that the current pension or part pension was too generous. He got away with this as he is still promoting this theory. He was trying to combine it with an article on school funding as late as yesterday. However he draws a large salary himself as editor of smh economics. The media have been criminally complicit in the elder bashing and robbing of seniors that has taken place over the past three years. Refugees who have copped a share of vilification have received more support than seniors. I am not saying they should get less but the disrespect for older Australians in our society is staggering. It is glossed over and accepted even by those who receive it when it should not be.
    HarrysOpinion
    19th May 2016
    9:29pm
    Is it disrespect or just blatant discrimination, Alex?

    Discrimination is an action or practice that excludes, disadvantages, or merely differentiates between individuals or groups of individuals on the basis of some ascribed or perceived trait, although the definition itself is subject to substantial debate.

    To disrespect someone is to act in an insulting way toward them. When you disrespect people, you think very little of them.
    particolor
    19th May 2016
    9:53pm
    Pensioner aren't very likely to Attack them :-(
    LiveItUp
    20th May 2016
    7:34am
    I feel sorry fir those on low incomes who have no capital and get none of the benefits that oensioners get. Pensioners are on easy street to these people.
    Anonymous
    20th May 2016
    1:23pm
    Retirees affected by the taper rate change are suffering DISCRIMINATION. They are being subjected to hurt based on being in a particular class of savers whose wealth was insufficient to allow them to achieve financial independence, but whose hard work and sacrifice enabled them to attain modest savings for old age. Those who could save less are being favoured. Those who were fortunate enough to have more are not being hurt. It's just one group, who have already suffered more loss than any other Australian due to falling investment returns.

    And what's worse, the discrimination is worst against the most disadvantaged. The educated who can earn higher investment returns suffer less. The healthy who can keep working suffer less. Those with no expensive illnesses or disability suffer more. Those with older homes that need more maintenance and renovation suffer more. Those with special-need children or grandchildren suffer more.

    A policy that improperly assesses wealth solely on the total of assets held (which is NOT an indication) is cruel, grossly unfair, economically damaging, and DISCRIMINATORY.

    I don't want to be a pensioner if I can avoid it. And I don't want to see people who don't need pensions receiving them. What I DO want is a FAIR and EQUITABLE system of assessment of need - one that recognizes INCOME and NEEDS, and doesn't just absurdly declare that if you saved a little (maybe to service an anticipated need) you are ''wealthy''. Clearly, that is an incompetent judgement that declares the judge ignorant in the extreme and unqualified to participate in this debate.
    Alex
    20th May 2016
    12:24pm
    Both discrimination and disrespect HS. Lots of it from all quarters. Pensioners have been singled out to bear the brunt of Government cuts. Pensions paid for by a life time contributions have been denied and retirees told they are on welfare. If any investment organization took clients money and told them they had to now find further money to live on or perhaps sell their homes to survive they would be sued but this is what the Government has done and is doing. Cuts to pensions have been justified by use of wedge politics, making the absurd statement that seniors who have no longer an earning capacity have more assets than young Australians who are just starting out. This has been discrimination. Seniors have been disparaged, called greedy and grasping while this is being done. Disrespect.
    Rodent
    20th May 2016
    1:37pm
    Rainey and others that are interested

    I am reposting this as information HERE in this post so that others may see it, and perhaps put a some appropriate Questions to the Greens about the decision they made in supporting the govt. Clearly they were had, there will be no Retirement Incomes review

    Dear Budwah

    The changes to the Pension that take effect on 1 Jan 2017, were passed by BOTH houses of Parliament in May last year.

    LNP put up the Bill in Parliament, Labor Opposed it but the Greens supported the Government to get the bill passed
    The deal the Greens did was predicated on there being a full Retirement Incomes Review, which so far has not happened, and I doubt it will in the near future.

    Attached is the BS I received from the Greens at the time

    Thank you for your email regarding the recent changes to pensions.

    The Greens believe in a caring society and that includes ensuring that everyone can have a dignified retirement. We remain concerned about the most vulnerable in our community, and the growing inequality that is seeing people who are on low incomes struggle with even the basics like a home of their own. We have ensured a pathway for a decent retirement in Australia but this is the first step of many to come.

    That is why we have supported the government to change pensions to better support those with low and modest assets. The legislation that we passed means that the level of assets you can hold before you go from a full-pension to a part-pension will be increased, so more people with modest assets will receive higher part-pensions.

    The only thing that has changed is the assets tapers. The classes of assets that will be considered remain the same – and your home is not included. If you have any concerns about how this might affect you personally or someone you know, you can get advice that takes into account your circumstances by calling Centrelink’s advisory service on 132 300.

    Changing the assets thresholds and taper rate will make the pension system fairer. This policy effectively reverses the decision of the Howard government to spend the benefits of the boom on tax cuts and bonuses to shore up support in the lead up to the 2007 election and now, because of our stance of this issue, more Australians who don’t have the advantage of significant assets or a healthy super balance will be able to access a full pension.

    We acknowledge that this means that those with substantial assets will get smaller payments from the government. The pension cuts out for a couple (with their own home) if they have more than $823,000 of assets on top of their home value but at the other end of the scale, a couple (with their own home) can hold an additional $50,000 before their full pension is reduced. Retirees should also be aware that if their assets drop down below these new upper-thresholds in the future, they will qualify again for a pension.

    The government has also agreed to give special consideration to retirement incomes in its Tax White Paper, which means we can finally look at superannuation as part of the equation. This is a review the Greens have been seeking for a long time. The terms of reference are explicit about involving stakeholders at every stage, to build on the already strong appetite for further change, particularly to the super tax concessions. The review will have a focus on pensions, superannuation, taxation and workplace discrimination, to guide the important reforms that Australians need.

    You can read more detail about the policy and our position in our fact sheet: http://greensmps.org.au/content/materials/better-pensions-fact-sheet
    Or you can find out more of the facts here: http://greensmps.org.au/content/materials/getthefacts

    Thank you once again for your email.

    Yours sincerely


    Senator Rachel Siewert
    Australian Greens Spokesperson on Ageing
    Anonymous
    20th May 2016
    1:50pm
    Thanks Rodent. If you don't mind, I will answer this with a response to Rachel Siewert, and copied to others. Can I refer to this published letter?
    Anonymous
    20th May 2016
    5:48pm
    Can't believe we are paying these inept simpletons so much to stuff up the economy because they are too dense to think past ''Duh, someone with a bit more savings is wealthy. Take it off them.''

    Anyone with a brain should have looked at the interest rates in 2007 and figured out that back then you were offering 10% return on savings against 7.8% pension increase if you spent. Today, you are offering 3% return on investment against a 7.8% return if you spend. Duh! The latter doesn't work if you want people to save.

    What's that about paying peanuts? Please can we pay peanuts. Monkeys are smarter.
    Rodent
    20th May 2016
    2:03pm
    Rainey

    Yes you may refer to it. It was sent to me at my Private Email address. It was sent on 30 June 2015 at 1.25pm .

    I had been exchanging Emails with her because of the Senate Select Committee that was sitting re the bill at the time. In my deliberations with National Seniors they asked me to send ALL of my information , including the Detailed Spreadsheets to ALL Senators , which I did. In the case of Green Senators I got almost the same exact text from all of them

    FYI I have sent and received over 800 Emails to all sorts of Politicians, interested parties, and important organisations on the subject of the proposed "Pension Changes"
    Anonymous
    20th May 2016
    5:56pm
    Good stuff, Rodent. Congratulations. I have done the same. Before the bill passed the Senate, I wrote to every Senator. Only one responded. He phoned me at 7 am to ask me to please explain the math. When I did, he replied, ''Holy hell! We missed that. I need to go back to my colleagues and tell them to rethink. This bill is crazy!'' Obviously his influence was insufficient. Too many overpaid dills in the Senate, it seems!

    BTW> I've written to Rachel Siewert. I'll let you know her reply (if I get one!)
    Rodent
    20th May 2016
    4:14pm
    All some weekend reading for those "interested" this man is always on the ball

    Title of article by John Wasiliev from AFR is- just google the following -

    Age Pension cuts more wide reaching than potential Budget changes
    LiveItUp
    20th May 2016
    4:28pm
    The AFR article fails to mention that people will need to live on their capital to replace their pension if they can't generate enough return on their capital. There is nothing wrong with doing that. Just ask a retiree who doesn't qualify for the pension today. That is what they have to do.

    Sorry folks you can't take your money with you when you die so why not spend it while you are alive.
    Anonymous
    20th May 2016
    5:52pm
    Bonny, you are dumb! Of course people who don't get a pension now live off capital if they want a high income or they invest badly. But to reward 560,000 people richly for blowing their savings is UTTER STUPIDITY. They have no incentive to spend their savings to live, because it just impoverishes them without them gaining. If they take cruises, at least they get some pleasure - paid for by the taxpayer, with a near 100% bonus over 10 years.

    Only an illiterate with no logic rants the way you do.

    A person with a brain doesn't approve of saying to someone who is getting 5% return on their savings, and living on maybe $10,000 less than the pension, ''Well, if you blow $200,000, we''ll give you an extra $15,600 a year, plus extra benefits.''

    There are sensible, fair ways to reduce pension payments to those who can be self-sufficient, and there are UTTERLY STUPID CRUEL UNFAIR WAYS. This is the latter.

    But self-serving Bonny is happy because it DOESN'T HURT HER.
    LiveItUp
    20th May 2016
    6:21pm
    Of course the government is saving money as they are simply not paying out so much in pensions. I am not that dumb that I can't work that out. I have no problem with people spending their capital first and then getting welfare when they need it. Why should people get welfare and then leave lots of money behind for others to spend when they die? That is what is simply not fair.

    I know of many young families who struggle every week to make ends met. They don't have any capital to fall back on for emergencies like these people affected by these assets level changes do. They don't get any of the benefits that welfare people do. Just a doctor's visit has them out of pocket nearly $100. They have to pay high rents or full rates as well.

    Meanwhile we have couple with a million dollars in assets getting paid welfare with all the trimmings that go with it. They because the government has decided that they have had it good for too long it wants to take some away and they have to spend their capital they say it is not fair.

    Yes it is not fair to the taxpayers some of who are really on struggle street.

    I am unfortunately not that dumb that I don't realise what is really going on here.
    Anonymous
    21st May 2016
    7:37am
    You are as stupid as the politicians who approved the policy, it appears, Bonny.

    Firstly, you are a dumb idiot if you think it only affects couples with a million dollars. IT HURTS PEOPLE WITH HALF THAT MUCH.

    Secondly, you don't know why those people SAVED that money, sacrificing lifestyle, and PAYING TAX ON IT AT FULL RATES. They may have major known future needs - like eye surgery to save their sight or teeth reconstruction. You have no idea what challenges they face that they SAVED FULLY TAXED MONEY TO MEET. Now they are deprived of the right to use that FULLY TAXED MONEY SAVED BY SACRIFICING LIFESTYLE, while the privileged who got huge tax concessions get more huge tax concessions, and the spendthrifts and cheats get full pensions.

    But most importantly, IT IS UNFAIR TO THE TAXPAYERS TO PUT TAXES UP BECAUSE IDIOTS CAN'T DO MATH.

    The means test changes CANNOT save money, because they PUNISH PEOPLE FOR SAVING TO BE SELF-SUFFICIENT. They reward irresponsible living and putting your hand out.

    You would have to be totally moronic and brain dead to swallow the LNP's bullshit on this policy. They made up a slick slogan to fool fools. And it ONLY fools fools. Anyone with an ounce of intelligence knows you don't encourage saving by telling someone ''spend that $100,000 you are getting a miserable 3% return on, and we'll give you 7.8% indexed six monthly, courtesy of the poor struggling taxpayer''. That is the height of utter stupidity, and the struggling taxpayers are going to be heavily burdened as a consequence of that idiocy.

    But stop lying, Bonny, and admit that you favour the policy because it left your big fat earnings untaxed and didn't hurt you.
    LiveItUp
    22nd May 2016
    8:32pm
    No big untaxed earnings for me just tax bills. Funny I always thought that the script was that when I reached pension age I would stop paying taxes and they would pay me instead. I certainly stuffed that up. Stupid me I guess.
    ex PS
    25th May 2016
    5:32pm
    Sorry to disapoint you Bonny but if your investments don't earn enough income to live on, you can apply for a full or part pension, there is no real need to touch your capital.
    ex PS
    20th May 2016
    4:54pm
    Does the government realise that if they encourage people to chase a better interest rate with their Super Funds they will have to be prepared to increase the amount spent on pensions when these funds go bust?
    Governments are not generally very good at manageing funds I remember when they were advising Public Servants to change from Defined Benefit Super to a market driven investment fund. Many people who fell for it were forced to work longer because the market did not come close to meeting expectations.
    LiveItUp
    20th May 2016
    5:39pm
    I've been through nearly 50 years of up and downs and I can't understand why people buy bargains at the shops but fail to buy bargains with investments. Why do they buy at the top and sell at the bottom? Super funds don't go bust people panic that's the problem.
    Anonymous
    20th May 2016
    5:54pm
    exPS. This stupid government is destroying the economy with idiotic short-sighted policies that discourage saving and will dramatically reduce the ability of people to be self-supporting in retirement."
    Put simply, they are inept in the extreme. THEY MUST GO.
    LiveItUp
    20th May 2016
    6:09pm
    I can't see how the government is discouraging people to save. I still spend less than I receive and know many others who do the same.
    Anonymous
    21st May 2016
    7:29am
    Well, that's all good then isn't it, Bonny. YOU aren't hurt, so it's fine. Stuff everyone else. Only Bonny matters.

    What a sick, vile, despicable attitude.

    If you can't see, then you need to LEARN. Shut up your self-serving rants and attacks on others and ask questions and listen. You might actually discover how WRONG you are and position yourself to support helping make the system fairer and more economically sustainable - BETTER FOR THE NATION INSTEAD OF JUST OKAY FOR BONNY.
    Anonymous
    21st May 2016
    7:47am
    Bonny, since you are so pathetically dumb, I'll say it again.

    Save $200,000 over the low threshold - money that might be badly needed down the track to save your eyesight or your teeth or to do essential home renovations or pay a carer or for home help - and you get a miserable $5000 to maybe $10000 return on it (unless you are among the PRIVILEGED EDUCATED who can get more). The IDIOTS in power are saying:

    Spend your $200,000 on a cruise or buying a bigger house that you don't need, or lose it on a high risk investment, and we'll give you $15,600 a year, rising every 6 months, PLUS a host of fringe benefits.

    Yes, SOME will get higher returns. So Bonny approves of persecuting the sick, disabled, educationally deprived, and otherwise UNDERPRIVILEGED for the benefit of high income earners like Bonny. Just so their high income isn't taxed. Much better to persecute people with much, much less, who have struggled to save a little and try to be at least substantially self-sufficient.

    Well only an idiot would go without lifestyle to save for old age now, because IT JUST DOESNT PAY.

    Moronic, damaging policy that will stuff the economy. But Bonny likes it because it doesn't hurt her.
    Anonymous
    21st May 2016
    7:49am
    Bonny, just once in your life, can't you stop being selfish and be objective, and think about the good of the nation.

    Answer: No. (What a dumb question, Rainey!)
    ex PS
    22nd May 2016
    6:33pm
    Bonny any business that trades in shares or bonds can go bust, it is unusual for a Super Fund to go under but not impossible. If a majority of a Super Funds clients insist on moving their investments into a medium to high risk environment and the market tanks, the fund will go bust, the fund will not be able to generate enough cash to pay its commitments, this is simple economics.
    Super managers are not banks the funds invested are not guaranteed.
    There are quite a few Super funds that have not shown a positive return for years, many of these clients will find themselves on a pension, at no fault of their own.
    LiveItUp
    22nd May 2016
    8:20pm
    No I am not saying spend your money on a cruise just live on your capital until you again qualify for the pension. There is nothing wrong with that as people just above the current thresholds have been doing just that for years. The change in the asset thresholds are better for the good of the nation. So if that is not be objective and unselfish then I don't know what is.

    With interest rates going lower an now forecasted to go as low as 1% before the cycle turns then people will be looking for yield. Not much yield left in property so what's left? The sharemarket.

    One has to ask why some super funds have not shown a positive return for years? If these are managed by experts then something is very wrong here.
    ex PS
    23rd May 2016
    12:06pm
    Bonny, I think that where Super Funds may be being put under pressure is clients having unrealistic expectations, I can remember in good times getting a return of 17% with my fund, I was young then and could afford to invest in a medium risk environment.
    I now invest in a low/medium environemt and accept an average of about 8%.
    I have money outside of the Super environment that is fairly safe with mostly hybrid bonds with a fraction in Equities, this will for the most part protect the innitial investment and as Bonds tend to do in times of finnancial instabiliy provide an income quite a bit better than fixed interest accounts.
    But if clients are still chasing anything near 17% they are in a high risk area and stand to lose money and drag down the returns for the fund they are involved with.
    I, like you see no shame in a self funded retiree living comfortably on the money they have managed to put aside and then going onto a part pension when they genuinly need to.
    I, was made redundant at the age of 55 and decided that rather go on the dole and look for a job that probably was not there, I would retire early and do what I wanted when I wanted. I have been retired for 5 years and have not cost the taxpyer one cent as I and my wife have been living off our own money. Part of the reason we can do this is we own our own home and owe nothing to anybody.
    I do not foresee ever needing to access a part pension but am glad there is a safety net.
    LiveItUp
    23rd May 2016
    6:19pm
    PS I think people will have to accept 5-6% the norm in this low interest rate environment. However it is going to take a bit more effort that just putting money in the bank.

    I have no shame in being a self funded retiree either but I do notice some others do. It's a mazing how many people leave their pension cards at home.

    I have been accumulating assests for decades and recently started liquidating them so now find myself with no debt and cash in the bank.

    I have been talking to various fund managers and they feel that people will start looking for more yield and with a hot overvalued property market they only place to find yield now is industrial stocks. Whether they are right only hindsight will tell.

    I hope to never qualify for the pension because if I do I don't think I am going to like the world we live in. Things are not going to be very good at all if that happens.
    BElle
    21st May 2016
    1:58pm
    I am at a loss to understand just who is complaining about the implementation of 15% tax on earning on amounts above $1.6 million dollars. If you don't have that much, and that is an extremely large percentage of the population, then there is no justification for objecting. If you do have more than $1.6 million dollars in Superannuation, you have no grounds for objecting to paying tax on the earnings over and above that on the $1.6 million.
    If you have the requisite amount invested then you would be earning a minimum of $32K interest on this amount. Of course you would also, because you have left it in Super, be paying exorbitant amounts of management fees, (your choice).
    If you are able to accumulate these amounts of money you must be on a good income during your working life. Then, I ask the question, why are you putting money into Superannuation and not investing in more lucrative forms of accumulating a nest egg? The management fees outweigh any tax benefit you may receive.
    Having been retired for some year, not by choice, we have seen the Superannuation and Aged Pension entitlement etc. change so many times that it is impossible to benefit from the changes, always to our detriment.
    A word of warning to those not yet retired and working your way to being self-sufficient financially in retirement. The rules that apply at this time will have changed considerably by the time you need to take advantage of your frugality. Good Luck with it.
    The prevailing Government should also remember that there are a good many people already retired who did not have the advantage of Superannuation, they are too often the "collateral damage" of Government changes. What we really need is a fixed bi-partisan method of pension etc. and make that a fixed arrangement and not subject to the whims of which ever party is in charge.
    Retired Knowall
    21st May 2016
    5:29pm
    Super will always be subjected to the whims of the Govt. of the day.
    I don't know who you have your Super with, but the Industry Funds have very low fees and their Capital Stable funds have returned over 6% on average over the last 10 years. In fact over 7.5% over the last 5 years. So the $1.6M in this fund would return over the $75K each year.
    It is better to diversify your portfolio and hold approximately 40 to 50 % in Super with the remaining spread across property, shares (fully franked) and cash.
    LiveItUp
    22nd May 2016
    12:41pm
    The only thing that I don't think is fair is that if people can have $1.6 million in super why can't you be allowed to put that much in as a lump sum. This would allow those who haven't be able to put money in to do so if they get an inheritance or sell a property etc.

    Also past returns are not always an indication of future returns. That said you would be better off in the long term have a balance super fund rather than just receiving interest on cash in the bank.

    The management fees on my SMSF works out about 0.2% per year. That would be just over $3000 on $1.6 million which I don't think is exorbitant.
    Rodent
    23rd May 2016
    8:29am
    Bonny, I am not sure why I am even bothering to write this. However here goes. - I refer to your comments, last para 22 May- "The change in the asset thresholds are better for the good of the nation. So if that is not be objective and unselfish then I don't know what is.

    As Pauline Hanson would say - please explain

    Could it be that you actually believe that the changes are Fair and Equitable? I really hope not. Perhaps you are only commenting on these changes because they will reduce Welfare expenditure as the Govt claimed. The current budget makes no such claim now.
    How can it be claimed that the changes are better for the nation when as a result of the changes different types of Pensioners get wildly different outcomes in pension at the same asset figures.
    Please go back and refer to the Govt's own tables that were produced at the time. just simply compare the figures in Pension LOSSES and Pension PAID for ALL pensioner types and you will see how these changes effect certain types of Pensioners more than others. Just use two asset Figures as a start $500k, and $700k
    How can it be good for the nation that a Single Home Owner with $500k in assets LOSES $8210 pa, and is paid a $3666 pa Pension , and at the SAME $500k Asset figure a Non Home Owner Couple gets a $1911 INCREASE in pension with pension paid at $34,923
    I could run through other examples of Inequity and Unfairness, but I doubt it would matter. I don't believe your point is relevant unless you are saying cutting Pensions is a GOOD thing for the country BECAUSE it lowers welfare costs. In purely NUMERIC terms that may be correct, but totally ignores the way it was done, and the outcomes it has produced.
    Taking this point further, why not cut Pensions even more, HIGHLY LIKELY Reduce expenditure even more.
    In closing how about the $50+Bill Submarines? Why do we need them, or that Qty, etc
    ex PS
    23rd May 2016
    12:17pm
    What politicians don't seem to realise is that this simplistic knee jerk reaction of cutting the Pension has overreaching economic ramifications.
    Pensioners mostly spend what they are allocated, most have to to survive. This means that if you cut a pension by $3,000.00 annually, there is that amount of money that is not going into the local economy, mostly small business.
    If you give someone who is well off a tax cut of equal value it will probably go into their bank account.
    Forget equity and fairness, it just makes better economic sense to put money back into the small business sector through Pensioner spending.
    Rodent
    23rd May 2016
    8:29am
    Bonny, I am not sure why I am even bothering to write this. However here goes. - I refer to your comments, last para 22 May- "The change in the asset thresholds are better for the good of the nation. So if that is not be objective and unselfish then I don't know what is.

    As Pauline Hanson would say - please explain

    Could it be that you actually believe that the changes are Fair and Equitable? I really hope not. Perhaps you are only commenting on these changes because they will reduce Welfare expenditure as the Govt claimed. The current budget makes no such claim now.
    How can it be claimed that the changes are better for the nation when as a result of the changes different types of Pensioners get wildly different outcomes in pension at the same asset figures.
    Please go back and refer to the Govt's own tables that were produced at the time. just simply compare the figures in Pension LOSSES and Pension PAID for ALL pensioner types and you will see how these changes effect certain types of Pensioners more than others. Just use two asset Figures as a start $500k, and $700k
    How can it be good for the nation that a Single Home Owner with $500k in assets LOSES $8210 pa, and is paid a $3666 pa Pension , and at the SAME $500k Asset figure a Non Home Owner Couple gets a $1911 INCREASE in pension with pension paid at $34,923
    I could run through other examples of Inequity and Unfairness, but I doubt it would matter. I don't believe your point is relevant unless you are saying cutting Pensions is a GOOD thing for the country BECAUSE it lowers welfare costs. In purely NUMERIC terms that may be correct, but totally ignores the way it was done, and the outcomes it has produced.
    Taking this point further, why not cut Pensions even more, HIGHLY LIKELY Reduce expenditure even more.
    In closing how about the $50+Bill Submarines? Why do we need them, or that Qty, etc
    LiveItUp
    23rd May 2016
    5:38pm
    Yes I agree the most inequitable part of the pension is the house. It should be included in the assets test to fix the inequity you have just pointed out. It is simply just plain stupid that people upsize instead of downsizing when they retire. I certainly don't want spend my retirement doing housework in a mansion.

    The person with the $500,000 in assets they saved for their old age needs to actually spend some of it to make up for the loss in pension. There is nothing wrong with doing that. It wold also cost the non home owner a lot more to live as they have to pay rent so that explains the bigger pension figure.

    Don't start me on submarines or jet fighters. Why do we need strike weapons?
    ex PS
    24th May 2016
    11:51am
    So, if we have a $500K home, we sell it to our kids at a reasonable price. They can then negative gear, rent it back to us so that we qualify for a pension and get rental assistance. as long as we do this within the prescribed limits that control disposal of asetts and the pension we should not have a problem.
    I can't see how that will save the government any money at all, actually it would end up costing more.
    It would be even more advantagious to us all if we could manage to provide the finnance for the purchase, might have to see a bean counter for that part. It also will have the advantage of keeping the family home in the family.
    Even better when or if we need to access Aged Care we have no assets that the government can take so we qualify for free care.
    All measures that I would not have considered until this government started to mess with our retirement plan of being totally self sufficient. This would be far better than taking out a negative mortgage. Seems the average retiree can be just as bloody minded as the government can.
    LiveItUp
    24th May 2016
    4:59pm
    I know of people who live in each others houses because it is so cost effective to do so. All the maintence, depreciation and interest are then deducatable off one's income.

    You can do all sort of fancy things so that you become a penniless bum that owns nothing but controls everything.

    Problem I have is that it is simply not worth my while to bother rearranging things just ot get the pension.
    LiveItUp
    24th May 2016
    5:00pm
    You pay for a granny flat to be put in your kids back yard. Who then owns the granny flat? You don't as it's not on your land.
    MacI
    25th May 2016
    10:32am
    ex PS - I don't think your scenario works too well. If you sell your house at a "reasonable price", i.e. around $500K, then you have increased your assessable assets by that amount thus decreasing your Aged Pension entitlement - even as a non-homeowner. If your "reasonable price" for your home is substantially less than market value then you still get caught because the difference in price between the market value and sale price would be considered a "deprived asset" by Centrelink.
    Adrianus
    25th May 2016
    12:14pm
    Rodent its not just about maths. You have not mentioned anything about the nation needing higher productivity.

    Bonny, are you forgetting about the "Granny Flat Rule."
    Rodent
    25th May 2016
    12:06pm
    For information re Pension changes. The following are some Super Guide readers comments from an article about the Age Pension changes due in Jan 2017 Super Guide.
    I am sure many will relate to these comments

    Comments from readers
    Jack
    The maths on this look really interesting. Under the new threshold I can get the full pension if my assets do not exceed $375,000 (for a couple). Let’s say I have $375,000 and so I receive the full pension and then I win $100,000 in the lottery. The new taper rate means I will lose $3 of pension per fortnight for every $1000 over the threshold. My lottery win then means that my new assets reduce my pension by $7800 (26 fortnights multiplied by $300).
    But my new assets from my win cannot earn anywhere near 7.8%. If they earn 4% in this new world of low interest rates, I lose $7800 in pension only to earn $4000 in interest. In fact, if I only earn 4%, and my assets are at the upper threshold of assets ($823,000) so that I get no age pension at all, I earn less income than the pension itself! So with these low interest rates, I have more combined income if I have fewer assets. The optimum is actually at $375,000 which gives me the full pension as well as the income from my assets.
    Guess what happens next? Pensioners will reduce assets to maximize their pension and the only way to do that is to put it into the family home which is still quarantined from these calculations. What does that do for housing affordability?
    Doesn’t look very clever to me
    Ian
    For those couples aged 65 with savings (whether in super or not) of between $375,000 and $1.15m (and probably higher), they would be financially better off to spend the excess now and go on the pension. To take an example, $823,000 (the end of the taper) would buy an actuarial equivalent of the full age pension (guaranteed and indexed for life of last survivor, reducing on death of first life to 66%) of about $30,000 pa. This assumes 4% interest, 2.5% inflation, Australian mortality tables with 3%pa improvements. BTW I should really assume a much lower rate because to match that guaranteed liability, the only correct investment is long term government bonds which are currently yielding around 2.5%–so the position is actually much worse.
    On the other hand, a couple on the full age pension with no assets will get $34,923 and with assets of $375,000 buying the same actuarial equivalent pension rate, would be able to get a total pension of $46,533.
    To put it another way, the couples age pension (remember: guaranteed and indexed) is worth about $920,000 in present value terms (same assumptions above). At the bond yield of 2.5%, it is more like $1.2 million. That sounds like excellent buying for $823,000!
    The government has in fact made a poor equity situation far worse for those in the no-mans land between $375,000 up to perhaps $1.5 million. It has effectively destroyed any reason for the greater majority of people to save for retirement. I would not be surprised if this ends up being a net negative to the budget bottom line as retirees change their behaviours. But I am surprised that they have not yet twigged to this yet. (There was discussion about it last night on 2GB when a retired planner rang up to point it out.)
    What actions might retirees take who find themselves in this position? Put money into home as you suggest. Or spend on fancy holidays or cars. There’s no much else that I can think of.
    This situation is actually comparable to the effective high tax rates suffered by those trying to find work and get off Centrelink. “Why bother?” was the conclusion. The economics do not add up.
    The minimum level of income to live comfortably in retirement according to ASFA is $58,444. This means that, unless you have more than $1.5m perhaps, the changes will forcibly consign the major bulk of retirees to a lower level of living, regardless of whether they made the effort to provide for themselves. Has Treasury really thought this through?
    Steve
    These new rules will encourage pensioners to dispose of assets, either by ploughing into the family home, or worse still “hiding it under the mattress” .
    A pensioner who is asset rich will be income poor. And there are more interest rates still to come.
    Talk about living on the poverty line.
    Come on grey power. Let’s push for a more informed debate on changes to the retirement income question. It’s not simply a matter of finding a budget black hole fix. And let’s get a better definition of what “wealthy” means…cos it sure doesn’t refer. To the poor pensioners who will lose their part pensions. Please note I do not condone pensions for the “genuine” wealthy people.
    Let’s just get it right about the thresholds.
    Ian
    Another way to look at this is as follows:
    If you and your partner aged 65 were both in good health at retirement, had $825,000 in savings (doesn’t have to be super) and owned your home, and you were offered by the government the opportunity to buy a tax-free lifetime guaranteed inflation-indexed pension of $34,923 pa for $450,000 (= $825,000 – $375,000), would you take it? Note: This pension yields an internal rate of return of 10%pa tax free using my earlier assumptions of Australian mortality, inflation and reversion to surviving partner.
    This clearly presents a massive arbitrage opportunity for retirees against the government. As I said, I suspect we will find more full pensioners in short time than the government expected as retirees desert the no-mans land. Why wouldn’t you
    LiveItUp
    26th May 2016
    9:21am
    Would I buy a better house or spend my excess just to get the pension? NO.
    Rodent
    26th May 2016
    3:04pm
    Chris Bowen said this today about Pensions?

    Mr Bowen has also confirmed Labor will leave the government's pensions assets test untouched if elected but would review the overall system, including the pension changes introduced last year with the support of the Greens.

    Well Labor now has a position/policy on Pension changes?
    Rodent
    26th May 2016
    3:09pm
    Missed this bit , a bit more from labor re pension

    We do not believe, looking at the latest set of books that the government has just revealed last week, that we're in a position to restore the changes they've made or reverse the changes they've made to the pension assets test," Mr Shorten said in Darwin.

    "What we will do is that we will review our pensions income because we're not convinced that meddling with part pensioners is the best way to go."

    The government successfully legislated the pensions assets test last year and it will come into effect in 2017, saving the budget $2.4 billion.