Retirement income system fails this group

A key area the government’s Retirement Income Review must tackle.

Portrait of a group of senior men and senior women

Australia’s retirement income system is failing singles and older Australians who rent, according to financial research consultancy Rice Warner.

The consultancy’s chief executive, Andrew Boal, made the statement while addressing the All-Actuaries Virtual Summit as Australia waits for the release of the federal government’s Retirement Income Review, which was handed to Treasury on 24 July.

Mr Boal said single retirees were often disadvantaged when it came to super savings and property ownership.

With the Superannuation Guarantee (SG) going to 12 per cent, more than half of couples would get close to a sustainable level of income (YourLifeChoices’ Retirement Affordability Index puts this at $44,212 currently for homeowner couples), but less than 25 per cent of single females and only a third of single men, he said.

“Couples tend to be able to get into home ownership more easily too, so addressing the percentage of single renters is going to be difficult,” he told the summit.

“Government rental assistance has fallen behind what’s needed, so that’s an area that needs to become more equitable in its own right – we think rental assistance probably needs to be increased by 40 to 50 per cent.”

Anglicare Australia said in its 2020 Rental Affordability Snapshot that the “dire lack” of affordable rentals for aged pensioners had to be tackled urgently. It noted that older Australians and those with special needs had higher medical, power and transport costs and assistance needed to be permanently increased, not just while Australia battled the coronavirus pandemic.

The Retirement Income Review was recommended by the Productivity Commission in its report, Superannuation: Assessing Efficiency and Competitiveness, and comes 27 years after the establishment of compulsory superannuation.

The review will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages. It was charged with considering the incentives for people to self-fund their retirement, the fiscal sustainability of the system, the role of the three pillars of the retirement income system, and the level of support provided to different cohorts across time.

Some industry figures fear that concerns about public finances could enable the federal government to ‘legitimately review’ the compulsory nature of the SG and “whether it makes sense to proceed with progressively lifting the SG to 12 per cent in 2025”.

Mike Taylor from moneymanagement.com.au says it is clear “voices within the Liberal Party” are “questioning the rationale behind the current superannuation system”.

“Queensland’s Senator [Gerard] Rennick was just the most recent voice to enter the debate, when he stated, ‘Of all the rorts that exist in this country, nothing compares to superannuation’, arguing that it was devouring the real economy and that at the very least it should be voluntary, not compulsory,” Mr Taylor said.

He said the government needed to be much clearer about the real objectives of the Retirement Income Review.

National Seniors Australia (NSA) has called for “reforms to simplify and strengthen superannuation and pension rules” to ensure “a fair and adequate retirement for all”.

“While Australia’s retirement system is one of the strongest in the world, it can and should do better,” Mr Taylor said, adding that Canada and New Zealand have much lower rates of pension poverty.

“Unlike Australia, which has a complicated system to restrict access to the pension, New Zealand provides a pension to all and recoups some of the cost through the tax system.

“This allows retirees to continue working without penalty.

“While we take 50 cents in the dollar from the pension over a certain threshold, in New Zealand there’s no penalty for pensioners who choose to work. They simply pay tax on their earnings.”

In YourLifeChoices’ submission to the Retirement Income Review, a key point was that the rate of the rental supplement had to be more realistic to assist those experiencing housing stress.

Almost 70 per cent (68.91per cent) of respondents to YourLifeChoices’ Retirement Income Review Survey 2019 replied ‘no’ to the question, ‘Do you feel fully supported by the Australian retirement system?’

What changes do you think the Retirement Income Review will implement?

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    COMMENTS

    To make a comment, please register or login
    el
    12th Aug 2020
    10:21am
    Would have been good to see an illustration that showed a more realistic depiction of the gender of retirees / age pensioners .... though women would feature more strongly among age pensioners and part pensioners than SF retirees...
    kram
    12th Aug 2020
    11:21am
    The fact that you don't own a house is taken into account within the pension calculations.

    As dividends have crashed, many SF retirees are worse off than aged pensioners (but you can't just give away assets to claw out some pension and the attached benefits to gain equality - not allowed).

    Bring on the N.Z. system. I'd be happy to pay tax if it brings me above the poverty level.
    KSS
    12th Aug 2020
    11:44am
    Yes homeowners are already disadvantaged in the means test whether single or coupled up. And it is not an insignificant amount either!
    Tanker
    12th Aug 2020
    11:51am
    How can you say homeowners are disadvantaged in the means test?
    renters are the truly disadvantaged group. I write as a homeowner and would hate to be renting.
    KSS
    12th Aug 2020
    1:31pm
    Tanker seriously!

    Full pension
    From 1 July 2020, pensions reduce when your assets are more the limit for your situation.

    Your situation Homeowner Non-homeowner
    Single $268,000 $482,500
    A couple, combined $401,500 $616,000
    A couple, separated
    due to illness, combined $401,500 $616,000
    A couple, 1 partner
    eligible, combined $401,500 $616,000

    Part pensions
    From 1 July 2020, part pensions cancel when your assets are more than the limit for your situation. Your limits are higher if you get Rent Assistance with your pension.

    Your situation Homeowner Non-homeowner
    Single $583,000 $797,500
    A couple, combined $876,500 $1,091,000
    A couple, separated due
    to illness, combined $1,031,500 $1,246,000
    A couple, 1 partner
    eligible, combined $876,500 $1,091,000

    In every case and scenario, the home owner is allowed fewer assets than the non-homeowner to the tune greater than $200,000. Home owners are continually punished for the sacrifices they have made to own their own home. You may not want to rent but to say that home owners are treated 'fairly' in the means tests is just not the case at all. Non-homeowners are already given an extra allowance on savings not to mention there are then other supplements they can claim such as rent allowance that home owners cannot claim despite frequently having outgoings on the home that renters do not have such as insurance, rates, water charges, maintenance etc etc etc.

    Now you may argue that all the supplements and indeed the age pension are not enough but don't for one minute think that home owners are not disadvantaged, especially if the home is their only asset!
    Greg
    12th Aug 2020
    3:12pm
    KSS seriously!

    YES, non-homeowners are disadvantaged. Sure they can have more assets, they also pay RENT, around here in a home like mine that's $600 per week over 30k a year, it's a lot of money.
    Youngagain
    12th Aug 2020
    9:14pm
    Generalisations are dangerous, Greg. Some homeowners have extremely high costs, while many renters are laughing. I know renters who get free rent in return for caretaking, yet actually pay and get a receipt, then get a cash refund so they can claim rent assistance. I know renters who have given their home to their kids so they can get rent assistance paying rent to children who give the money back by paying their bills.

    What is most unfair about the current system is that it is toughest on those who worked really hard and were honest and diligent, but only managed to pay off a modest home that is now in need of high maintenance and is perhaps in a high rates and insurance zone, and how have just enough savings to not qualify for pension help.

    Frankly, anyone who expects to live in a home that rents for $600 a week doesn't need or deserve government assistance. If that's their expectation, they can damned well get off their bum and fund it themselves. Government assistance, if it's to be means tested and hard workers who save are to be punished, should assist people to attain a basic standard of living only. That's the problem with the current system. It's wide open to manipulation and it's being easily exploited by people who are more than capable of supporting themselves but choose not to because it's disadvantageous. Meanwhile the honest battlers are suffering - and yes, homeowners ARE discriminated against very unfairly. After all, most of us COULD own a home. It's a small minority who rent for reasons other than that they didn't bother to strive and sacrifice in their working years.
    Chris B T
    13th Aug 2020
    12:56pm
    I would like those who quote Rent per week state how much Rent Assistance is Received.
    Eg $600 per week reduced by Rental Assistance, not that on average $600 per week is typical without Rental Assistance.
    To be even more clear the Actual out of Pocket Expense per week rent.
    Each group has a Different Advantage over one another, hard to please all.
    Greg
    13th Aug 2020
    2:32pm
    Younagain - "Frankly, anyone who expects to live in a home that rents for $600 a week doesn't need or deserve government assistance."

    You tell me "Generalisations are dangerous" yet you seem to think renters paying $600 don't deserve assistance. $600 in some Sydney suburbs, far north for example, gives you a very ordinary house.
    Youngagain
    17th Aug 2020
    5:46pm
    That may well be, Greg, but if you can't afford to live where you want to live, you have to move. Those who support themselves have to live with that reality. Why should those who rely on the taxpayers be so much more privileged, and entitled to expect the taxpayer to fund them to live where they choose?

    No, renters paying $600 per week DO NOT deserve assistance, because wage earners (who may well HAVE to live in a given locality due to work obligations) and self-funded retirees don't get help to pay $600 per week rent. They either sacrifice other things to afford the rent or they find a cheaper place - even if that means moving to a small unit, a run-down shack, or a remote location. These are the realities of life. What is it that makes pensioners think they have such superior entitlements? No wonder the government is broke, when those who don't contribute are regarded as far more entitled than those who do!
    Youngagain
    17th Aug 2020
    5:49pm
    BTW. Greg. I am a homeowner and I live in a house that would rent for far, far less than $600 per week. I would like a better house. Why should my kids pay more tax to enable a pensioner to live in a house that rents for $600 per week when I am penalized for owning a far inferior home? If renters are entitled to help to pay $600 per week rent, then I should be entitled to help to buy a better house so I can have the same level of comfort.
    Horace Cope
    12th Aug 2020
    12:16pm
    It seems that there are not many happy retirees if the articles and responses in this forum are taken to be the norm. My point is that we are given information such as in this article but the information is slanted to support the argument. The numbers and percentages thrown up have no base for which a comparison can be made. I could say, for instance that I met with a few neighbours and the opinion on whether the price of beer was too high achieved an 85% yes vote. This could be shown as a true survey without asking how many were surveyed or whether they were beer drinkers.

    There are people who rely solely on an age pension who are in financial distress because they rent and the rent is much higher than the subsidy. These people choose not to move to cheaper accommodation for a multitude of reasons and, it could be argued, they don't want help yet their plight is shown as the "norm". Rental accommodation throughout Australia varies from state to state, city to country and town to town so it is almost impossible for any government to devise a rental subsidy scheme to cover all situations.
    Barbara Mathieson
    12th Aug 2020
    1:28pm
    Actually older solo females renting , are definitely the worst off here !

    And try relying solely on the Age Pension!
    Yes, my rent , ( 1 bedsitter ) is over 30% of my income , so careful ‘ considerations ‘ rule my life.
    I feel I am fortunate in having a good landlord with a lovely outlook, so no I won’t shift!!
    Sundays
    12th Aug 2020
    1:54pm
    Senator Reddick is pro big business. Of course he doesn’t like compulsory superannuation. He also doesn’t mention how people are supposed to survive in retirement. I found this article all over the place. Housing stress would be eliminated if there was more social housing available.
    Youngagain
    12th Aug 2020
    9:16pm
    Maybe the Senator doesn't like the fact that taxpayers are subsidizing the retirement of the wealthy with massive superannuation tax concessions, while battlers get very little help to build a retirement nest egg. Upping the SGT to 12% will hand mega-millions more to high income earners while pushing more battlers into a situation where all their savings achieve is to deprive them of pension income and benefits until it's all eroded away.
    Lewi
    12th Aug 2020
    6:53pm
    we live on $1423 per forthnight aussie pension we own our unit and just make ends meet save 50 dollar per month for small holiday now and then
    Youngagain
    12th Aug 2020
    9:19pm
    Wow. Lucky you. SFR couples with just $1 mil are living on $30,000 a year WITHOUT concessions and benefits pensioners enjoy. Of course they COULD just draw on their savings, but then what would be the point of having sacrificed to save? Might as well blow it all and get a full pension and all the nice benefits that go with it. Of course keep the allowed amount, and invest it as a nice pension top up. What an IDIOTIC system we have.
    Sundays
    13th Aug 2020
    8:54am
    We all make choices Youngagain, and we won’t live forever
    Greg
    13th Aug 2020
    2:38pm
    Youngagain - Well that's what we are doing and are fine with it. That's the point of super, save for your retirement expenses to a point and when you draw down enough you start to get a part pension which will increase in time.

    It's only Abbott/Hockey who changed the rules and made it advantageous to spend the money now and get a pension because thy wanted to stimulate the economy with the retirees money....but hell with the governments down the line who would have to balance the budget.
    kram
    16th Aug 2020
    12:22pm
    Dear Young Again. That return for SFR couples on $1 mill has probably fallen to about $23,000 a year due to Covid. Those on the pension do receive more and have received extra due to Covid.
    Having worked and saved all my life, I do find it hard to throw away $300 thousand just to get on the pension.
    And Greg. having a one-eyed political view of the pension system that all parties have attacked and depleted for over forty years does not help it being corrected and made fairer.
    Youngagain
    17th Aug 2020
    5:41pm
    Likewise, Kram. This 'spend your savings' mentality is born out of ignorance, arrogance and selfishness. Spending your savings merely deprives you of the benefits you saved for. It does NOT balance things out and make you as well off as someone who does not have to spend their savings to achieve a livable income. It's patently UNFAIR to deny someone the benefit of having worked hard and lived frugally to put money aside by depriving them of income because they saved. It's essentially theft. It's no different from putting your hand into their bank account and taking a fat scoop of cash.

    That said, I am spending on home renovations with the attitude that I will have the home I can love living in and if that means I qualify for a part pension, good! The taxpayer can ante up, since both taxpayers and pensioners have failed to support demands for a fairer system and have allowed the government to continue with a system that punishes responsible living and rewards overspending.
    Big Kev
    13th Aug 2020
    11:00am
    My Superannuation doesn't allow pension and I earn $2600 per annum more than health benefits card. As a fmr public servant I still pay tax so what I receive is under the limits. My wife has no income and is not eligible due to mine. However because of that $2600 we pay full medications and gaps on doctors and specialists. As we both have chronis health conditions that means $10,000-$12,000 per annum, putting us in worse position than some pensioners. I would also feel that it is sexist that my wife receives no income support.


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