Fears for breadth of retirement income review

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Baby boomers had their say in the May federal election, sensationally playing a key role in returning the Coalition rather than electing a Labor Party intent on dismantling franking credits. Now it appears the Government will tread carefully with its retirement income review so as not to upset the same cohort.

The terms of reference for the review, which have been promised by the end of the year, are being determined with a view to keeping baby boomer voters onside, according to media reports.

Treasurer Josh Frydenberg is drafting the guidelines, with Prime Minister Scott Morrison taking a keen interest.

The review would be expected to cover the key pillars of retirement: superannuation, private savings, the Age Pension and home ownership. YourLifeChoices’ next Retirement Affordability Index, set to be released on 6 October, will present expert views on the aspects that must be considered – or reconsidered. Ours will be a no-holds-barred exercise that explores all issues, sensitive or not.

The Australian Financial Review is reporting that the Government may rule out touching certain ‘sacred cows’.

It says that according to government insiders, the Age Pension and the superannuation system are unlikely to be hit and that other “no go” zones have been identified.

“It leaves open a less contentious review to iron out kinks, such as the interaction of superannuation and the government pension, which can create perverse spending and investment incentives for middle-income retirees stuck between the two systems,” the AFR reports.

“The impact of superannuation on the government’s balance sheet and national savings will also be examined.”

Professor John Piggott, a member of the Rudd Government’s Henry tax review and pension review panels in 2009, told the AFR: “It’s very important the retirement income system is viewed as a whole to recognise how the system fits together.

“Overall, we have a good retirement income system, but it needs systematic attention.”

He said that “risk sharing” retirement income products needed to be developed to allow for the fact people are living longer.

“Most people revert to an account-based pension which doesn’t share any of the risk,” said Prof. Piggott, director of the Australian Institute for Population Ageing Research.

A Green Paper prepared by the Actuaries Institute’s Public Policy team and written by Anthony Asher, David Knox and Michael Rice, stresses the need for integration between the key elements of retirement.

It says: “A world-leading system would take an integrated view across the major sources of income and expenses for retirees, including the Age Pension, superannuation and non-superannuation savings (including the family home), aged care and health costs (including pharmaceuticals). The current system, though world-leading in some aspects, falls well short of that.”

It argues that the system is “complex, intrusive, contains anomalies, produces perverse incentives and is sometimes unfair.”

[b1] Do you fear or welcome the retirement income review? Should the Government be brave and thoroughly review all areas?

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Written by Janelle Ward

79 Comments

Total Comments: 79
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    Heaven forbid if the government looks at its hypocritical treatment of unfair and unjust DEEMING RATES on cash deposits which impacts on pensioners and part pensioners! Thoughts and Prayers!

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      With many super funds and other investments earning 10% or more then the deeming rates are very generous. Even with half your money in cash deposits and half in than better preforming investments you would be earning more than the deeming rates.

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      Uncaring Big Bear – plenty of people don’t have investments earning 10% mate. Try thinking of others for a change.

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      Another reply from the LNP paid troll VCBB. Deeming rates are a rort by the government to try & force those with a little money into risky investments like shares. If you are retired & not working at all then you have to return to the workforce under government legislation to be able to start or add to any superfund or pension fund etc, so VCBB it’s not as easy as you make out.

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      As usual, nonsense, BB – deeming rates have nothing to do with super fund payouts, and everything to do with having the temerity to hold a few dollars in the bank.

      Keystroke error for the day:- Deem Ingrates ….

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      I read earlier this week that less than 5% of age pensioners have more than $250,000 in assets. Looking at the comments here it appears all the contributors are in that category.

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      do you have any stats to support that anecdote Theo?

      The 5% claim seems unlikely given roughly 24% of those of pensionable age receive a part-pension and therefore do not qualify for the full pension courtesy of income or assets test. Given there are just shy of 2 million age pensioners, it follows there would be somewhere more than 450,000 part pensioners. I suspect more than 50,000 of the part pensioners are caught by the assets test thresholds ($263,250 and $394,500 for home owning singles and couples respectively), and no need to even contemplate the full pension renters with less than than the asset threshold, which are higher than the $250,000 stated. Of course most could be caught by the income test but I doubt it.

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    The government attacks the banks of not passing on interest rate rises and falls and here we have a government being hypocritical when it comes to DEEMING RATES on cash deposits in fixed term deposits, whereby they do not demonstrate leadership and equality when dealing with pensioners and part pensioners, it appears that we do not matter.

    We are not big donors and don’t have access like Hillsong, Twiggy, Gina, Murdoch media, Pratt, big business or the minerals council, its like screaming into the wilderness.

    This inquiry is not going to be beneficial to pensioners and part pensioners.

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      Simply invest you money in better preforming investments and you will earn more than the deeming rates.

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      Again Very Uncaring Big Bear retirees often don’t want to invest in more risky investments. Maybe it’s worked for you…so far, that doesn’t mean it always will work.

      You’re a narcissistic person, the likes of which are not needed here.

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      Another reply from the LNP paid troll VCBB. Deeming rates are a rort by the government to try & force those with a little money into risky investments like shares. If you are retired & not working at all then you have to return to the workforce under government legislation to be able to start or add to any superfund or pension fund etc, so VCBB it’s not as easy as you make out.

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      The most risky investment you can have is cash deposits as it loses it’s value quite a lot after inflation and tax.

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      What tax, at 0.25% interest for most accessible accounts ( and possibly 0% if rates drop anymore) I doubt if you’ll earn enough to pay tax & if you do you have millions in the bank & inflation is running under 2% so no great loss either really.

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      Not much left if any after 30 years to spend if you leave your money in cash deposits. If you invest it well you will earn more than you can spend so it grows until you depart this mortal world. I’d rather live and die well instead of being on struggle street myself.

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      BigBear….strongly object to you saying …”simply invest….” Many elderly people – they do not have super, just a little savings in the bank. They grew up not knowing or having been taught the complexities of ‘superannuation, share market, investments”, etc. Is NOT so simple.

      Only this morning, I was around helping my elderly aunt now living in Aged Care. Worked all her life on her farm with hubby (who passed away 5 years ago). No kids. One reason I have to go around to see her is to play her message bank, delete rubbish calls, etc. The only “simple” thing she understands is that she is techno and money illiterate! What little money she does have is in the bank she has been with all her life – earning the grand sum of .9%. There is not a hope in hell of her changing her money to “better investment platforms” as she does not know or understand it. And one of the big financial bibles is to never invest in anything you do not understand. Believe me, I have tried.

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      sunnyOz, choices have consequences and it is nobody’s fault that your aunt chooses to invest with her lifelong banker and suffers as a result. She is not Robinson Crusoe in not understanding finance, however some old sticks will take advice or appoint a guardian or financial administrator with power of attorney to act in their interests.

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      I support you VCBB.
      The left wing extremists here all expect to be spoon fed by the Government.
      They expected this to happen all of their working life.
      I planned my retirement from age 21.
      It’s a pity others here didn’t do the same

    • 0
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      MarkelAdel, another capitalist right wing LNP paid troll

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      I wish Karl and others who seem so knowledgeable of these paid troll gigs could share how they know of them so those interested might apply for one. It cannot be that difficult to wind up one side or the other of an argument as keyboard warrior intolerance and outrage is so easily triggered these days.

  3. 0
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    It’s time to give everyone over retirement age the pension if they want it and it then becomes a debt on their estate when they die. So simple to do.

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      Not a very smart response is it, just more proof you’re an LNP troll or employee. All we have to do is get rid of all our assets before we die then there is nothing to repay & i’ll be the first to offload all my assets & take it offshore just like the rich & politicians do now.

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      Ha ha I’d like to see you do that and your family leave you destitute.

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      lol my money will be offshore & undeclared, I’ll get the full pension, can access the money anytime. I won’t be destitute as I’ll be doing what the rich & politicians do now with peace of mind that any government won’t change the laws that will affect them or their rich mates.
      hahahahahahaha

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      Rubbish – you don’t pay back what is a bought in advance payout at retirement…

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      Nothing is bought in advance. You only get the old age pension (welfare) as you have no other means of support.

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      So that 7% of income tax still being taken is for handling the account for you?

      Pension and all other GENUINE Social Security is paid for …. it’s not the fault of Pensioners, the disabled, and the Unemployed that government continually hands out welfare for PPL, childcare, and other things … just to garner votes – what has been paid for every day of working life and is still being paid in tax levied to make up any shortfall, is not a debt and never can be.

  4. 0
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    As long as they don’t shift the goal posts for those of us who have already retired. You make decisions based on the rules at the time you retire – very unfair & unsettling when these rules keep changing and your retirement income level drops!!! Every change needs to have a grandfathering proviso.

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      This government doesn’t really care about the impact of changing goal posts even if you have structured your retirement around current rules as was proven in January 2017 when $1.50 per $1,000 was increased to $3.00 against assets which dropped or took away pensions completely for 100’s of thousands of pensioners.

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      Well Karl Marx you can stop bellyaching about this or any other Government seeing you’ve squirrelled away your assets overseas. So what exactly IS your problem?

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      KSS, roflmfao, I don’t have any assets or monies overseas, YET & I didn’t say I had, learn to read. Just pointing out the stupidity of some posts regarding paying back any pension received when you die.
      I think you have the problem, me, no, no problem at all. Always look on the bright side

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    Universal pension for all, no asset or income testing. Tax paid on ALL income & ALL investments etc. Can’t be any fairer than that.

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    To answer the question, “Do you fear or welcome the retirement income review? Should the Government be brave and thoroughly review all areas?”, I welcome any review of the pension/welfare system and, yes, all areas must be looked at or the review will be a farce.

    The result of the reviews will certainly favour some and antagonise others but any good legislation should be designed to disadvantage as few people as possible. No legislation since Federation has ever advantaged 100% of the population. It is hoped that any major changes will be “grandfathered” as those already retired have certainly made financial decisions on the rules in place at that time.

  7. 0
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    Professor Piggott reckons we have a good retirement system, overall. Obviously, he has not had any experience of it, and speaks like all academics and paid government advisors. Furthermore, he continues to promote the furphy about people living longer. He ignores increasing problems of health and quality of life. The Australian retirement system is not designed to give a good quality of life after work has ended, rather to keep as many as possible at, or about, the poverty line. It is not a simple, worry-free system. Centrelink is testimony to that. The green paper by the Actuaries Institute appears to be much more realistic, so there is little chance of the government paying any attention to it, or adopting any of its findings. A government review that does not improve the system is a waste of time and money.

  8. 0
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    The government and there Deeming rates,you can always buy shares or put your super into growth as they say you can do that which you can, but some of us say if you can afford to lose it gamble it if you cant don’t touch it we all remember the GFC

  9. 0
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    The government and there Deeming rates,you can always buy shares or put your super into growth as they say you can do that which you can, but some of us say if you can afford to lose it gamble it if you cant don’t touch it we all remember the GFC

  10. 0
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    The 2017 changes to the Pensioner Assets Test should have been grandfathered and needs to be reversed.

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      should have, wasn’t, reversal not going to happen …. majority are unconcerned so time to move on

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      Stealing pensioners assets should never be condoned.

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      wasn’t stolen and nobody is going to change anything because you cannot let it go. I also don’t like it but no point grizzling and not adjusting to the new normal.

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      Assets purchased after income tax have no bearing – including them in a pension assets test is double taxing them… wrong on all counts.

      Double taxing an asset is tantamount to stealing it…. or a significant portion of it…

      (Downe at Ye Olde Governmente Revenooers:-

      “Lessee now, Trebor (the magnificent) – you own a boat and a Windbag bought out of post income tax money you’ve earned legitimately over a lifetime of solid work… well – we’re fair – we’ll only take the engine and trailer from your boat and the wheels from your Windbag – oh – and the differential…. the wheels aren’t enough ….”

      Yeah… yeah – that’s fair… in a pig’s eye….

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      It was one of the foolish policies of Hockey. The consequences were the beginning of the collapse in retail and hospitality as all those savers stopped spending. They were never going to borrow to make up the shortfall of cashflow like the government expected. In fact the sensible ones went immediately into frugal mode to again save and invest for income.

      My new saving regime to replace the income lost is as Karl suggests overseas. Much safer. Deposits are not safe in a bank any longer since the bail in legislation either. In fact bank deposits are at risk if we enter a recession. Shares fall quickly and rebound again. The only losers are those who panic and sell as the prices crash. It’s really a perfect buying time. A low cost index fund has been rewarding. Yes at some point it will fall for a while but I have no intention of selling. I’ll be still buying and it will be noice and cheap then.

      Continually cutting real cashflow in Main Street is not clever policy at all.

      I’m now very grateful that Hockey kept me out of Centrelink clutches even if it was a very dumb idea for Australian businesses.

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      Correct, Mad as Hell, the reversal of the 2017 Asset Test changes MUST be pushed for in this review, as even Economists (such as reported in YLC recently) have pointed out in detail the absolute stupidity of these changes making people on $400K assets better off than those who just miss out on pension or those on say $850K.

    • 0
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      I will be grateful if the review does not put me further in the poo by further reducing the assets threshold down further so those on $300K are better off than those on $400K.

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