Labor backing for super plan could see pension increases

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Labor’s plan to support increases in superannuation contributions to 12 per cent could have a welcome side effect for age pensioners.

Apart from reducing future reliance on the Age Pension for hundreds of thousands of Australians, increasing the compulsory Superannuation Guarantee (SG) could also lead to an increase in the base rate of the Age Pension.

Federal shadow treasurer Chris Bowen said this week that Labor would follow through on legislated super increases from 9.5 per cent to 12 per cent by 2025. The increases will start in July 2021 with 0.5 per cent increases each year to 2025.

“Let me make it clear that the Labor Party does not regard a 9.5 per cent super guarantee as providing adequacy,” said Mr Bowen.

However, some critics doubt whether the increase is necessary. Recent Treasury modelling showed that the Age Pension is set to cost the nation less than previously thought. The share of GDP spent on the Age Pension will fall to 2.5 per cent by 2038, which is “significantly lower” than previous estimates.

Instead of freezing or scrapping planned increases to the SG, Labor sees the modelling as proof the system works and wants to make it even more effective.

Association of Superannuation Funds of Australia (ASFA) chief executive Dr Martin Fahy agrees with Labor’s plan.

“What that [Treasury retirement income] report appeared to be saying was that the burden of the Age Pension continues to decline, and so the previous Treasury forecasts have been shown to probably be high,” said Dr Fahy.

“That creates a very strong case for saying that superannuation is working, and that by going to 12 per cent as is legislated, it will continue to work, in that people will continue to retire with higher retirement balances, the burden of the Age Pension will continue to fall, and we’ll be able to therefore pay out higher state pensions to those who deserve it and need it.”

Critics of the increase say it will cause problems for low-income workers and that only the wealthy will benefit.

“What concerns us more is that people on very low incomes, forcing them to save 15 per cent of their income might make their life now very difficult because they have to pay their bills and pay mortgages as well,” said Combined Pensioners & Superannuants Association policy director Paul Versteege.

“We accept that if you want to be self-sufficient in retirement, you need to make a higher contribution than the 9.5 per cent that applies at the moment, but as I said, we can see the downside of increasing that compulsory contribution as well.”

However, Industry Super Australia (ISA) deputy chief economist Matt Linden believes increasing the SG will benefit lower income earners.

“It’s particularly important for lower and middle-income workers, because that’s a group who are often not making additional savings,” said Mr Linden.

Dr Fahy agrees: “The beauty of the super system is that everyone has the aspiration to be self-funded, and by going to 12 per cent it means even those on the average industrial income can look forward to having a comfortable and dignified retirement.”

Read more at The New Daily

Do you think lifting the SG could leads to increases in the pension base rate? Who do you think would benefit most from such a plan?

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170 Comments

Total Comments: 170
  1. 0
    0

    Who knows. IMO it would be much better and a lot simpler if everyone paid say a flat 10% of their income tax into a government fund which then paid everyone the same livable rate of pension. If people want to retire with a higher income than that then it’s up to them to save and invest to provide it. As things stand we have a complex super system of tax concessions and exemptions which provide by far the biggest benefits to the wealthy.

    • 0
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      Pretty simple, innit, Dave? Only hard for governments tied up in ideologies and other nonsense.

    • 0
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      That is what we had, Dave R, before the 7.5% contribution was incorporated into consolidated revenue and the means and assets test introduced. OK, now you propose 10% which is acceptable but who will stop a future administration do the same all over again?

    • 0
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      people, surely it’s past
      time to get over the National Welfare Fund and everything you misunderstand about it. It was acknowledged over 60 years ago that “Thus the weakness of the present formula is that the income for the fund which it produces is directly and solely related to aggregate earnings and has no regard to likely calls on the fund in varying circumstances.” [Hansard, 218, 27 August 1952, p.637.]

    • 0
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      Quite right, CJ.
      Farside, you have quoted some bureaucratic gobbledygook which when translated was the kind of failed justification used by Fraser later to justify stealing the people’s National Welfare Fund money. Crooked actions by politicians (of both sides) must never be forgotten, as they will repeat such actions in future as CJ has noted.

    • 0
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      GeorgeM, it is not gobbledygook because you do not understand the quote, let me paraphrase for you: the fund income is not related to calls on the fund. In other words, the fund was a loser from the get go and would be unable to deliver future pension benefits.

      Rolling the remnants of the fund into consolidated revenue in the early 60s simply recognised the failure of the scheme and Fraser just buried a beast long since dead. Even so people have had plenty of time to consider their options and plan accordingly.

      More on the history of the fund at https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:%22library/prspub/4511255%22

    • 0
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      No, it is you Farside who does not understand what I wrote. If you want more bureaucratic gobbledygook to sanitize bad actions of politicians, the best way is to go and read links such as you have provided. Fact is Fraser stole the taxpayers money, and Keating shut it down – Liberal & Labor being in it together – to hoodwink the people as they squirrelled away their money. If they had focused on expanding it as a Future Fund, maybe by ensuring Large companies & Rich paid appropriate taxes (latter boosting the 7.5% take), then there would have been no shortage of money. Don’t support these crooked actions – perhaps you were a politician!

    • 0
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      GeorgeM, cannot argue with someone that embraces the myth and refuses to understand the financial facts but out of interest how did Keating shut down the National Welfare Fund?

    • 0
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      You must have been a bureaucrat, not a politician! Cannot understand facts (avoiding these by labelling them as myths) in simply language without trying to confuse others in bureaucratic gobbledygook! For your education, since you ask, Keating shut down the National Welfare Fund in 1985 through an Act of parliament as the money had already been depleted badly as it was stolen by Fraser earlier.

      You are clearly diverting from my main point which was, to repeat, “Crooked actions by politicians (of both sides) must never be forgotten, as they will repeat such actions in future as CJ has noted”, in response to Dave R’s suggestion of “a flat 10% of their income tax into a government fund” as that will never be safe in politicians hands.

    • 0
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      Good one George, the National Welfare Fund Act 1943 was long dead by then and so it was only repealing the bill (introduced by Keating’s assistant to be precise). All relevant social service payments had been made directly from Consolidated Revenue well before then.

      As it happens I think 10% of tax collections into a fund is a reasonable idea however I would leave it with the RBA to manage as a trusted independent body. My issue with your original comment is that you grabbed hold of the myth of “stealing the people’s National Welfare Fund money”. It is past time to stop flogging this dead horse and move on, it has been more than 50 years after all. Do yourself a favour and chase down a copy of “Myths of entitlement: a history of the National Welfare Fund” presented at the Australian Social Policy Conference https://www.aspc.unsw.edu.au/node/36/paper/2140

    • 0
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      Once again Farside you resort to referring to bureaucratic write-ups (which record history in biased terms as they wish to remember) – which are favoured by bureaucrats & politicians as both of them have been beneficiaries of defined benefit pension schemes unlike other ordinary people. Fact is the people’s money was stolen by Fraser, and Keating shut down the fund instead of re-instating it as any real “labour” treasurer should have done. So no, 10% into any Fund where Govt can even remotely influence the management is fraught with danger, as history shows.

      RBA can remotely monitor it (remember they also monitor the Banks and note how their behaviour has been controlled), but it would still need to be an independent body managing it with financial experts and representatives of the people dominating it. I don’t mind such an independently managed Future Fund if they also introduced Universal Age Pension (so all can benefit), but it should initially include the 7.5% already being paid by taxpayers into it, with additional contributions from the Govt from additional taxes from the rich by imposing Minimum Taxes to stop many of the rich paying Nil or very little taxes. Universal Age Pension would be entirely affordable with these actions, combined with massive savings by shutting down a major portion of Centrelink as the ATO can easily send out the pension payments – say based on Age 65 & Residency (say 15 years) with NO other tests.

  2. 0
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    With people living longer, the welfare bill will become a bigger problem for Government. It would be better to use super contribution increases to create a reserve to fund future increases in the age pension?

  3. 0
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    a) The 9.5% would provide adequacy if it were takenout of the hands of government and of their crony fund managers, and rolled over into a single system – a Genuine Future Fund for all – under a managing body totally divorced from the government and cronies above.

    A new, modern, ramped-up Social Security fund if you like.

    b) Does this mean that Ladie’s Labor is now approaching the concept espoused by my good self – that ALL not currently in work should be receiving super contributions (like sprogging women)? Thus a pensioner in retirement would continue to receive fortnightly or whatever contributions into his/her personal ‘future fund’….

    Governments twist and turn like trapped snakes over this kind of issue , without ever once approaching reality ….. time for a radical new approach, methinks…. Australia Leads The Way!

  4. 0
    0

    ALP appears to be doing everything they can to disadvantage the existing wage/salary earners and indirectly existing retirees.
    1. An increase in SGC will further discourage wage/salary rises because employers consider the total cost (grosspay+super) when deciding to employ people. Increased SGC will reduce average gross pay or increase unemployment.
    2. Increasing the minimum wage(especially by as much as what the unions want) may benefit some but will undoubtedly increase unemployment.
    3. Re-introducing higher rates for overtime will result in lower average normal wages

    Forcing employers to pay more SGC may result in less people on the aged pension over time but will either cause those who are working to have less disposable income and have less money to spend giving a higher chance of a recession and of lower interest rates!

  5. 0
    0

    At the end of the day it is up to the individual to provide for a better retirement, the super guarantee only goes so far, everyone including gov knows that it is not going to be enough thats why all the noise about increasing to 12% etc
    Companies can’t afford it , the taxpayer can’t afford it, The gov can’t afford it and money could be spent on other things like infrastructure so we all need to learn to do without and put a bit away each payday. The OAP will become a safety net only, after all the ASG has been in for nearly twenty years are there actually people out there who haven’t planned or saved for retirement in nearly twenty years. Or do they expect some nice person to help them out as usual

    • 0
      0

      They expect exactly that. Know quite a few people with high salaries a few years ago and are today totally reliant on the OAP.

    • 0
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      Yes there are. People who have been made redundant on one or more occasions. Single older woman who come from an era when woman didn’t work. People who have been forced to be carers for family. Could go on but you get the idea.

    • 0
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      Thoughtful I have been made redundant several times as has my wife, last time at 59, I am now almost 63, and have not gained employment, my wife was made redundant 2 months before me and now works 2-3 days a week on a casual as required basis. The only dealing with Centrelink we have is a low income health care card which we are entitled to. We have never ever applied for Newstart. We own our home outright after making it a priority payment. Single older women get a widows allowance do they not. Carers get a carers allowance, chances are the person they are looking after gets a disability pension. If they are on a low income they can live in a taxpayer funded house, if they live in privately owned rental they get a rental allowance, health care card, If a pensioner they get free rego cheap prescriptions, cheap travel and in some states free travel.I could go on but I think you get the idea eh. User pays

    • 0
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      All true (usually) but no real ability to save for a reasonable retirement. Not that they haven’t planned to do so.

    • 0
      0

      And when you provide for a better retirement, Labor steals it with unfair changes to policy that are specifically targeted and disadvantaging those who are NOT WEALTHY but ARE just managing to provide for themselves – while ensuring the wealthy don’t lose a cent.

    • 0
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      And when you provide for a better retirement, Labor steals it with unfair changes to policy that are specifically targeted and disadvantaging those who are NOT WEALTHY but ARE just managing to provide for themselves – while ensuring the wealthy don’t lose a cent.

    • 0
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      O&W, I have read the latest statements from Mr Bowen & Mr Shorten & what you say is totally incorrect. You keep posting these assumptions about Labor. They aren’t the government yet but most likely will be, if they are telling porkies then we will know soon enough, but we do know your LNP do & have for the past 6 years.
      Are you working & being paid by Mr Morrison & the LNP, one would think so from your posts.
      And please stop repeating yourself. Tony Abbott had a bad habit of that as well, all the more reason I believe you are an LNP employee

    • 0
      0

      I am not responsible for the technical glitch that makes posts on YLC duplicate, Mr Ignorant. I delete the duplicates when I can, but it’s not easy as the system prevents deletion after a few seconds.

      As to statements by Bown and Shorten,- yes, I’ve read their lies. And I’ve conclusively evidenced them to be lies. Firstly, they are based on 3-year-old obsolete data. They do not factor in the impact of the Transfer Balance Cap legislation. Secondly, they ignore the fact that many retirees are, for various reasons, locked into their investment strategy and unable to change it. Legislation actually prevents some changing. Others would suffer major loss if forced to sell their shares now, when the prices are way down. And thirdly, they lie about people who get franking credit refunds not paying tax. It’s precisely because THEY WERE TAXED that they currently get a refund. Labor doesn’t dispute the tax is paid, because it claims it must be credited to the wealthy. It just insists that battlers should be OVERTAXED on dividend income.

      Then there’s the harm they threaten by forcing people into foreign investments, risk investments, property, or to reduce assets and claim a pension. All of which is BAD for the nation – as is taking growth capital from Australian companies that provide jobs.

      And as if that isn’t enough, there’s the patent unfairness of letting a part-pensioner owner of a $2 million home enjoy franking credit refunds PLUS part pension PLUS concessions while the poor guy who has half as much but had $1 over the asset limit in March 2019 is deprived for the rest of his life.

      Did you know, SFR, that excluding retirees, the level at which Labor will take the most income is $28,000 a year? Did you know that Labor carefully exempted anyone with more than about $2 million from any loss?

      And here’s a fact I’ll bet you DO NOT know. Half the people being steered into alternate investments don’t even know that they will still be robbed of franking credits, because 70% of accountants and investment advisers don’t even know how credits work in investment trusts and don’t bother to claim them for their clients. The majority of retirees who invest in investment trusts or managed funds don’t even know their accountant is doing them out of thousands in refunds they are legally entitled to.

      See, SFR, some people actually research and deal in FACT rather than Labor propaganda. Sadly, you are obviously not one of them. But please STOP giving BAD ADVICE and endorsing bad policies that will cause hurt to the nation. You don’t know what you are on about at all. And this has nothing to do with Morrison or the LNP – whom I despise and consider to be hideously unconscionable liars. It has to do with POLICY THAT IS WRONG. If you think I’m an LNP employee, you are an idiot. Sorry, but that’s fact.

    • 0
      0

      O&W, I have read the media releases, done my homework, etc, etc, etc. & from what I gather is that very very few retirees on small incomes will be affected. If what you are saying that Mr Shorten & Mr Bowen are lying then we will find out quick enough if they become the government after the next election.
      The ones that have proven they lie & cheat to become & retain government are the LNP, time & time again they have shown the extent of their lies & deceit.
      Yes I do agree that a very small percentage may be affected as in all legislation that’s passed not just legislation on a financial basis.
      If you are locked into your investments then that’s simply a choice YOU made, You also made the choice on what shares you have so if they are worth less than what you paid then that’s the share market isn’t it, rise & fall. Don’t blame the government or anyone else for bad investment choices. I’m sure if it was the other way round you’d be dancing in the street doing somersaults.
      I made the choice, sold ALL my shares & reinvested & I’ll wear the results of my investment & I won’t be whinging if it goes pear shaped as it’s my choice & if & when more legislation is introduced or put forward then I’ll reassess my portfolio.
      I would strongly recommend that you seek good expert financial advice & bite the bullet & sell your shares. If you can’t for one reason or another then you need to put in place a strategy so you can.
      To Quote John Lydgate “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”.

    • 0
      0

      OMG, SFR. You really are ill-informed and ignorant.

      labor is NOT taking from anyone with more than $2 million. Libs already took care of ensuring people with that much pay some tax. They will NOT be impacted by Labor’s theft.

      Educate yourself about the Transfer Balance Cap legislation and ask an INTELLIGENT accountant to explain to you how the franking credit legislation works because you clearly are swallowing whopping lies and haven’t the knowledge to recognise the deceit.

      I don’t need financial advice. YOU NEED TO LEARN TO DEAL IN FACT INSTEAD OF LABOR PROPAGANDA.

      The OAP cuts out at a level of just over $800,000 for a couple. That INCLUDES furnishing, personal assets, cars, etc. And it INCLUDES the cash that must be held for day to day living expenses (experts recommend at least 3 years cash to avoid being forced to sell assets at a loss in a downturn). The national average investment return is 5% over a rolling 10 year period (a high return in one year is meaningless!).
      If a person has $750,000 invested (and that would be a lot from an asset base of less than $900,000), their AVERAGE return would be just $37500. That a lot LESS than the OAP when you take into account that pensioners get concessions that the self-funded don’t get.

      Now, as to moving investments. If I did that right now, I would lose 20% of my portfolio due to share price falls. The shares that fell are rising again – slowly – and are predicted to recover over a 3 year period, which is precisely why experts say you should hold cash to last 3 years. But Short-on-brains is forcing people to sell in the middle of a downturn by slashing their returns at the worst possible time.

      If you dealt in FACT rather than believing Bowen’s lies, SFR, you would see that Labor’s policy is cruel and wrong. It’s impact is heaviest at earnings of $28,000 a year and at a retiree asset level of under $900,000 for a couple (or about $500,000 for a single). After that, the loss gradually reduces until those with over $2 million are unlikely to suffer any loss at all.

      I would love to have $2 million, and I certainly wouldn’t be worried about Labor’s cruel policy if I had even 75% of that amount.

      I think you seriously need to stop pretending to know everything and showing gross ignorance.

  6. 0
    0

    It’s time for someone to pay attention to the base rate of the Age Pension for people with small or no superannuation.

    Genuine poverty is always on the horizon – whether you own a house or not.

  7. 0
    0

    Labor is great at spending otherpeople’s money. The increase comes out of the pockets of employers and as it is a coat on a business there will have to be an adjustment. Will the business increase prices or will it reduce hours of work. Either way the public will pay.

    Same as the proposed living wage. The ACTU and Shorten are rabbiting on about an increase for low income workers of up to $43pw. Do they mean that the amount is before or after tax? Again, businesses will pay. A tax cut will give a wage increase without businesses having to pay but the ACTU and Shorten are aiming at business.

    • 0
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      Actually, Old Man, if you look carefully, Bowen is only promising the change from July 2021 which means there will only be one increase of 0.5% in the entire term of the next Govt. Bowen is piss-weak, and is scared to be labelled as irresponsible financially in case he gives out any significant benefits to anyone, while he happily digs into their pockets without a second thought. No problem if he makes businesses pay as well, that’s not him!

      We are in for a disaster if he gets in, along with the arm twisting from their mates, the Greens.

  8. 0
    0

    With Labor set to raise the minimum wage and the Super contribution rate, thousands of small business will be forced out of business, unemployment figures will escalate and taxes will need to increase to pay the welfare bill. Politics at it best.

    • 0
      0

      Ha ha, so funny! Little people with more money to spend will help everyone. When they have zero spending power that is when all that happens. Trickle down has failed so let’s try trickle up!

  9. 0
    0

    Nothing is worth putting labor in charge of the country for a long time yet, especially with so many minority groups all set to demand what they believe is their entitlement.

    Animal rights people attacking grazing properties to Transsexuals getting offended about Mr and Mrs. No thanks

    • 0
      0

      Ha ha, this one is even funnier. Mr and Mrs?
      Trolls are reaching today.

    • 0
      0

      Has nobody read about the guidelines for public speaking where certain words should not be used, lest they offend transsexuals. Words that give people specific gender.

      Also the futuristic preschools where little boys and girls have to dress the same so they will have free choice at puberty about what sex they want to be.

      Paddington in Sydney would be awash with such ideas

    • 0
      0

      Charlie, spot on!
      They are trying to out-bid the Greens by stealing their policies!

  10. 0
    0

    A good system is to give everyone the old aged pension but then include all income from all sources including super pensions in the normal standard tax system. As done in some countries. Also a Govt controlled fund is too much of a temptation for the Govt to raid which they have done in the past.

    • 0
      0

      Yes, yes and yes

    • 0
      0

      It’s called a universal pension. 99.99% rort free. $ to run the admin minimal so huge savings for the government in admin cost. No robo debt.
      If pensioners still have hardship for one reason or another then they apply for welfare for housing etc.
      Simple system but all politicians can’t see that at they make it more complex every year.

    • 0
      0

      SFR – right on. This was discussed for ever on this site. I come from a place like that and
      it seems to work well there. But do not forget that there are other things these places have going for them to make it work. Like compulsory private health insurance: my mate sent me an email last week. He pays 470 Swiss francs a month as a single bloke (1Swiss is equal to $A1.40). So the medical costs for the Govt there are negligent compared to the cost here for people just on Medicare. I do pay private health insurance here and I find this dear but a look overseas has convinced me that we are not doing too badly. So when we compare pensions overseas with our system we might have to see the full picture.

    • 0
      0

      Quite right, SFR, wish a large numb of people, as well as the YLC, would write to their politicians and push this sensible reform.

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