Government assistance is only good if people can access it.
Retirees who were living off reliable income streams based on interest rates and dividends are now facing serious financial challenges.
And, as banks cancel payouts and returns from other investments dry up, this pain looks set to increase.
Some who have seen significant reductions in share portfolio returns may have to turn to the government for assistance.
However, according to the Association of Independent Retirees, those who have already done so are having trouble dealing with a Centrelink system that is already struggling with waves of newly unemployed and businesses seeking government assistance.
Once seen as a retirement income staple responsible for around 60 per cent of the income derived from the Australian sharemarket, banks’ dividend payouts are drying up as they defer payments or devalue assets due to the pandemic.
The Australian Prudential Regulation Authority (APRA) has also called on insurers and other institutions it regulates to cut or defer dividends, says a Guardian Australia report.
Research from Realindex Investments shows that companies in sectors including energy, transport and consumer services will also reduce shareholder payouts until the economic effects of COVID-19 become clearer.
Retirees who rely on rent payments from investment properties will also take a hit, says Association of Independent Retirees president Wayne Strandquist.
“They’re struggling to find a reliable source of income,” said Mr Strandquist.
“They might have a lot of assets on paper, but they’re not making anything.”
Prior to the pandemic, self-funded retirees held bank stocks for the fully franked high dividends, meaning tax had already been paid at the corporate rate of 30 per cent.
Bank stocks were particularly attractive when term deposit rates were at record lows.
“There were a number of commentators saying, ‘Don’t put your money in the bank, buy shares in the bank’,” Mr Strandquist said.
“They treated it almost as an annuity.”
As a result of these losses, many retirees who thought they would now be eligible for a part-pension are struggling to deal with Centrelink, with some falling through the cracks and wallowing in relative poverty.
Queues of “hundreds and hundreds” of people outside Centrelink offices have put many of them off, he said.
“What 75-year-old would want to deal with that?” Mr Strandquist asked.
“From go to whoa, it takes months to inventory all their assets, talk to their accountants, and then there’s a delay in processing from Centrelink.
“The pension can’t make up for the 40 per cent drop in dividends they’ve seen.
“Many self-funded retirees who do not receive an age pension are suffering financial hardship due to the economic impact of the coronavirus pandemic with little or no support from the government.
“The Association of Independent Retirees acknowledges the unprecedented steps taken by both federal and state governments to control the coronavirus health impact on the Australian population and the economic consequences. We look forward to the concerns of self-funded retirees being considered in the recovery initiatives of the government,” he said.
Are you falling through the cracks? Have you found Centrelink more difficult to deal with in the last few months? Is enough being done to help struggling older Australians during the pandemic?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
Join YOURLifeChoices, it’s free
- Receive our daily enewsletter
- Enter competitions
- Comment on articles