Superannuation – no escaping the share market link

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In an opinion piece for the Herald Sun today, former federal treasurer Peter Costello has taken a shot at our superannuation system, suggesting governments need to focus more on where super is invested, rather than threaten higher taxes.

The first two weeks in January have not been kind to the stock market, with an eight per cent fall in the Australian market and similar decreases felt around the world. So far in 2016, the Australian and US stock markets have experienced the worst start to a calendar year, ever.

Following on from this point, Mr Costello asks this question of the readers: “So what kind of crazy-brave person has been putting new money into the stock market during the period it has been falling like this?” His answer: “Practically every working Australian.”

While there are some working Australians who hold their own self-managed super fund (SMSF) or are rigorous about changing the setup of their super fund, most average working Australians have their superannuation paid into shares by default.

Mr Costello points out that while governments show great interest in legislating the amount that can go into your superannuation, and even greater interest in taxing that money, they fail to show anywhere near enough interest on what happens to those funds once they are paid into the account.

According to Mr Costello, there is a lot of fear and speculation around potential changes to the superannuation system and changes to tax and contribution rules. He believes that if the Government wants to extract full income tax on super contributions, people should be able to opt out of the system altogether.

Finishing off his opinion piece, Mr Costello said, “Our stock market is still 30 per cent below its level of eight years ago. There’s a lot of lost years for people to make up and a lot of lost wealth. You can see why people prefer to put their voluntary savings in less volatile assets like residential housing. They’re more careful with their money than the Government is.”

Opinion: Making sense on super

It may not feel like it, but we are most likely just several months away from a Federal Election. The single biggest issue for older workers and retirees heading into the next election is undoubtedly the future of the superannuation system and the knock-on effects to the future of the Age Pension.

It was interesting to read Mr Costello’s column in today’s Herald Sun where he highlights flaws in the current superannuation system in regards to the average Australian worker.

Unfortunately, his statement taking a political shot at super funds, “for most people it is an industry fund set up by unions and employers…”, is factually incorrect. According to the Association of Superfunds of Australia (ASFA), most assets and accounts are in the retail sector, not industry funds.

It is also disingenuous to criticise ‘Canberra’ when Mr Costello’s own policy, as then Treasurer, was to stall super contributions at nine per cent for years, resulting in far lower balances for most working Australians today.

However, Mr Costello is correct about one thing: there are a lot of unknowns and concerns from older Australians in regards to the superannuation system currently, with no certainty of future changes if another government gains power.

And yes, for the superannuation system to succeed, all political parties need to agree on, and secure, the future of super so that Australians can plan their retirement without the worry of significant future changes.

What do you think? Did Mr Costello raise some valid points? Is superannuation the single biggest issue for older workers heading into the next election? Do default superfund allocation models need to be reviewed?

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Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
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86 Comments

Total Comments: 86
  1. 0
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    Exciting times, the ASX is down again today…..Super funds are dropping like a stone, will folks end up broke or will the Super funds begin to earn? that is the question. I do not care either way..but it’s fun to watch. The full aged pension is loads of money and enough to live on anyway and even save up to $1000 a month of it. Folks are watching their Super balance drop each day this year and it’s only the beginning of things to come, so hang on for the roller coaster ride of your life OH YEAH..

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      Can you please tell me HOW a person, especially a single pensioner, can save $1000 a month, with costs as they are? Load of rubbish! My single aunt struggles like he’ll yet she lives so frugally, can’t afford air conditioning, her house is worth less than $400k. Rates alone are $58 a week.

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      We do indeed live in interesting times. With the cost of oil down and coal dropping like a (black) rock one has to sit back and wait for all other assets (which are directly related to energy costs) drop. And then the trickle will become a stampede. And then boomers will stop consuming many things and spend to be able to live. Anybody who thinks she’ll be right needs to go and get another dose of optimism medicine. The wonderful retirement we were all promised is unravelling faster than an antacid tablet in a glass of water!

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      It just anther phase I the market cycle. I’m just waiting for it to turn and then ride it backup again. Looking forward to riding up that 30% plus some.

    • 0
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      Going to use your pension to buy stocks eh?

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      OK then let’s make it easier, you can save $600 a month, easy, The full aged pension plus supplements and rent assistance is loads.

    • 0
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      Once again – rubbish. As stated, if you own your home, you don’t get rent assistance. You must have no health issues, not bother with insurances, not own a car, not have to worry about house maintenance, not eat, and don’t have electricity or candles. Total bull.

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      Now I’ve gone and upset the unbelievers, I do have candles, and they give my affordable living studio a nice warm glow in Winter, only $2 for packet of 6. Me wind up gramophone from 1925 with me Al Jolson records so no need for power there.

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      IF the way I budget upsets others, then…I ask as the good professor also asked … WHY IS IT SO ?

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      We own our home and retirement is a few years off yet, however I worked out that we at this point in time would need $33000.00 PY to survive the way we currently are (and very happy). This includes top cover health insurance, car costs and going out to eat once a week. It can be done.

  2. 0
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    I think Mr Costello is missing the limelight and should look at where he left the budget and what he did for our economy instead of trying to become a public figure again

  3. 0
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    Peter Who? Oh, yes, that fellow who helped blow the last mining boom profits on bribes to the public in attempts to keep the LibNats in Federal power indefinitely. How did that work out?

  4. 0
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    I wonder how Peter Costello is enjoying the Federal pension he receives now for life? It is interesting that pollies are always advocating that the rest of Australians rely on their superannuation accounts to live in their old age (which, in turn, are reliant upon the nebulous authenticity of the stock market) while, they are comfortable in knowing they can rely on that indexed, generous state pension?

    Why are adequately funded and secured state and private pensions not the way to go in the future for all? Oh, that is right, the country can’t afford such things … just as it can’t afford the health or education systems. However, it can afford to maintain a military adventure in the middle east for thirteen years? And it can afford those billions and billions for overly advanced fighter planes and most likely never to be used submarines? The priorities are skewed. But that is true not only of Australia, they are skewed in the same way in the US and Britain.

  5. 0
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    Perhaps superannuation might be an issue for the greedy and selfish. For mine the biggest issue is compassion and humanity – how we treat other humans. The two major parties have failed on compassion and dehumanized victims of war and oppression desperate enough to risk their lives to get to Australia. Who do I vote for? Dunno. Independents, and small parties like Xenophon, Lazarus and so on maybe. Labor is ahead of LNP on most issues, but on the big one of compassion they fail.

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      Not too sure I agree with you Batara. Remember that governments are not supposed to be money vending machines as we expect them to spend our money wisely. Well that’s another story!
      If you want to talk about empathy consider that Labor did not go after poor and average citizens with the next round of ‘Work Choices’. The current government is doing just that. And the previous government did not attack the poor with a new GST on everything. The current government is doing that as we write.
      I will agree that Independents are the way forward as they are not totally prostituted like the current government which is big business controlled and owned.

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      I’m with you Batara. The conversation so far has been totally self centred. We need to open our eyes to the world and maybe others won’t keep taking a pot shot at us. We are so inward looking that our big issues are about a West Indian cricketers comment to a journalist – shish! Two of my friends are helping refugees on Lesvos, and even though I sent some news of what they are doing there to the Courier Mail, they haven’t even bothered getting back to me. Have a look on https://sowphiya.wordpress.com/2016/01/16/moria-refugee-camp-lesvos-greece/
      It’s amazing what some unselfish people can do.

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      Yes Paul.

      I spent a bit of time wandering Greece and was always impressed by the kindness to those in need.

      One beautiful example is the botanical garden in Athens. It has hundreds of year old kennels built into the walls to house stray dogs in winter. I often saw elderly women feeding stray cats and dogs.

      The garden has a wonderful fountain to provide shelter and water for the insects, bees and birds in the dry summer.

      It is so sad that Greece has borne the brunt of the GFC.

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      batara, that was the rich that made it too australia, the poorer ones are still in their country???

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      What we really need to do is to focus on our back yard not to poke our noses in other countries business. We have enough that are not working, and this government is trying to screw the poor, and those disabled, instead of focusing on the healthy and not working ppl.
      Stop picking on those that are struggling to cope into their old age.
      And start creating jobs, for those that need it. INvest in us, then you won’t lose on the stock market. The housing crisis, is SEVERE, build proper housing for those that need it…..MOSTLY the Elderly. and the money you invest i’m sure will come back to you and you will lose a lot less than you do on the stock market. Which many who are managing their own Super funds are doing and they won’t lose a thing.

    • 0
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      Batar
      Vote Australian Liberty alliance ,Pauline Hanson, Fred Nile or fortitude etc. the 2 main parties will destroy this country and end up like europe

  6. 0
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    The responsibility for superannuation and rates of returns should be the government.
    Why can’t we be allowed put super into the successful Australian future fund solely under government control with no legal robber baron financial companies allowed to further gorge themselves at the super trough.
    Superannuation will only become fair when all politicians super is placed in the same
    Australian future fund.
    Currently no politician of a few terms gives a rats about our superannuation losses

    It does appear that this site attracts financial and super advisors who make comments without any declaration of self interest. These cowardly mongrels pontificate on this site and say how great it is all going and just be patient while they run away with more of our money.

    • 0
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      I have the same suspicion GC. In my books financial planners should be dealt with in the same way as drug dealers or people smugglers. At the very least seen that way in the eyes of society.

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      here here, it will never happen though, they are a protected species.

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      Don’t want to throw water over the flames but be aware that both sides of politics have been circling the superannuation industry for some time. They want to nibble away at the edges and cream some of the loot off for government to spend (waste!). Don’t expect anything to change and I read that a government will in the not too distant future nationalise superannuation. Then thye can thieve all they like.
      Vote for an Independet!

    • 0
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      The responsibility for superannuation and rates of returns should be the individual not the government.

    • 0
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      I think your correct Gray computing.
      and do they know what they hell they are on about. MMM
      I wonder

    • 0
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      Sorry Gray
      I thought the same about the Future fund and said so, before reading your colourful and succinct comment.
      Have a nice day.

  7. 0
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    I pray to the Lord who gives me my financial plan…it’s simple and works

    • 0
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      Well PIXAPD you seem like you are on the full pension I call people like you bludgers as you can”t provide for yourself and so a welfare receiver at the taxpayers expense. Wait until the government put you lot on food stamps that might fix you bludgers up because it will happen in a year or two

    • 0
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      robbo… I cannot help but agree with you. Indeed it’s a terrible thing for me to have worked from age 13 years, paid tax and then had the gall to apply for the aged pension at 65, how rude was that?

      AND yet here I am getting free licence, rego and other things, Gold Opal card and $2:50 daily cap, prescriptions for $5:20, discounts on power and gas bills. So many of us ‘aged pensioner bludgers’ out there you know

      And you a shining light to Australia and a blessing to the Govt, a person who would claim NONE of those things from the Govt, you would not even ask for discount on your utilities and would even refuse them if offered to you. Not even a part pension will you take.

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      You got me in one go Pixad don”t get anything from the Government able to make me own way and so is my family we have MORALS pity all Australia wasn”t like this, COUNTRY would be a better place.

      (keep in mind the food stamps for you lot it is coming very soon).

    • 0
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      Gentlemen………….seriously.
      The issue is that the rules are in place robbo. Also not everybody is able to make good and not everybody has opportunity and the gifts to make it all happen.
      My issue is not with a person who works a full life and then collects a pension. My beef is with those amongst us who bleed the system from the day they are born, live a stress free life without working, suck the lifeblood out of the safety net when they should be getting nix and then get the full pension as well as other add-ons to sustain their miserable worthless selves.
      I congratulate you on success robbo. I dare say you have used the tax outs to their maximum benefits as well. So let’s not throw stones at a person who has WORKED and is now retired.
      “Life wasn’t meant to be easy” but people were meant to be honest and ethical. Few are.

    • 0
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      I don’t condemn anyone who is on welfare that needs it. It’s those who arrange things so they are entitled to it that present a problem to me. These are the real bludgers and one of the reasons behind the new asset test rules. These people do not need the pension.

    • 0
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      Wonder how many food stamps will be in a book? ha ha

    • 0
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      Bonny, There really is no room left for arranging ” things ” under the new asset test rules other than living in a very expensive home . Unfortunately we are not going to see high value home exceptions changed because too many wealthy and Politicians may be affected .
      If this Government wants to be fair to all , any house value over 2 Million should be included in the assets test , including Politicians . In some States that value would still be generous at the i Million mark .Regrettably many elderly no longer have the health and energy to go through the strenuous process of purchasing and moving to a more expensive home . Abbott – Morrison probably knew they could not escape the often very unfair limits when someone is around the cut off rate and needs monthly interest payments to make ends meet . And we all know how low these type of returns are in these days .

    • 0
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      Rules of Quidditch: The Bludger is a jet black iron made ball, and it is used in Quidditch. It is 10″ in diameter, and there are two of them.
      There are two Bludgers used in every match, and which are bewitched to fly around and knock the players off their brooms.
      It is the beaters job to protect their teammates from the Bludgers and at the same time aim them towards the other team.
      – J. K. Rowling

    • 0
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      Hey Pixapd ,free licence and rego how on earth you get that? Also what is a green opal card?

    • 0
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      tj.. Free licence and rego…… no problem as to green opal card, I recommend Specsavers for I wrote… GOLD

  8. 0
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    Recommended viewing …. the new film THE BIG SHORT ….. it will not, fortunately or unfortunately, validate your faith in the markets as dependable …….

  9. 0
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    Bob: when the Howard/Costello government left government, the economy was $20 billion in the black. The future fund held $95 billion. We’ve gone backwards ever since with spending exceeding income, significantly by the poor excuse for a government that followed. Nevertheless, little care and no responsibility once they get the pension. Maybe, like corporate managers, their remuneration should be performance based.

    • 0
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      Julian, with your keen sense of history no doubt you would be aware of the disaster brought upon North America and Europe by unbridled greed and stupidity soon after the Howard government was voted out of power. You might also have read that Australian society did not suffer to the same extent as other Western nations because of teh actions taken by the Labor government led by Kevin Rudd with Wayne Swann as treasurer. If you read recent history you might realize that Australia’s deficit has blown out since Abbott and Hockey got their hands on the Treasury.

      From what I read Costello goes down in history as one of our worst treasurers, matched for the title of worst in history only by John Howard in the Frazer years of squandering mismanagement.

    • 0
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      Nasty, but true. Memories are so short.

    • 0
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      Julian: it always surprises me that disciples of the the current government refuse to acknowledge history when they spew out their statistics. Labor was voted in at the end of 2007. The GFC hit in 2008. Please tell me about how you and your extended family were thrown on the unemployment scrapheap in the years which followed. They were’nt???? How strange! I have news for you: China helped us avoid the GFC but the amount of money the Rudd government threw around was the other stabilising policy. I personally did not agree with this but I could see that nothing else could be rolled out fast enough to achieve this. We did get insulation, PV solar and cost free hot water so there was actually a benefit going forward for the nation. That has not happened with the current bunch of misfits who only understand about sending money to their mates in the big end of town.
      My issue with right wing governments is simple: they are puppets who are owned by big business and the rich and in power to do the bidding of the rich…NOT THE NATION!!

  10. 0
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    plan their retirement without worry not under any of our present political parties, it is just a cash cow, and not used effectively to create jobs, I believe most of the money flows overseas worsening our budget.

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