Reliance on Age Pension remains

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A new report compiled by Rice Warner on behalf of the Actuaries Institute, has revealed that of those Australians now aged 30, over half will rely on the Age Pension as a means of retirement income. The white paper on retirement incomes, For Richer, For Poorer, highlights the financial issues facing future retirees.

The paper found that the changes, scheduled to commence on 1 July 2017, to asset thresholds and taper rates may result in median wealth couples losing the part Age Pension, which would affect their hopes of a comfortable standard of living. By comparison, the report found that even though those in the top income bracket could easily afford a comfortable lifestyle, they still qualify for a part Age Pension.

But the news is worse for those who are least wealthy, as their reliance on the Age Pension as a retirement income will continue. For those in the bottom five per cent income bracket, the Age Pension provided 93 per cent of their income in retirement and 73 per cent for those in the bottom 25 per cent income bracket.

“Importantly, the white paper shows that the least wealthy sections of the community, both now and in the future, will continue to be entirely dependent on the Age Pension to maintain even a modest lifestyle”, said Actuaries Institute chief executive David Bell.

One particularly sobering statistic was uncovered; those in the top five per cent income bracket had 50 times as much wealth as those in the bottom five per cent income bracket. This differential would drop to 10-fold for those retiring in 30 years time, suggesting that the superannuation guarantee is working for those who have had long enough to reap the benefit.

The report supports an already compelling case for a complete and forensic review of retirement incomes, including the inclusion of the family home in the asset test. Currently, an age pensioner could live in a property worth $3 million and have modest savings and still receive an Age Pension. Surely this can’t be right?

You can download and read the full white paper at www.actuaries.asn.au.

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Written by Debbie McTaggart

41 Comments

Total Comments: 41
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    Whoever has paid their taxes,are entitled to the age pension. In fact,the ones who have paid most, are surely entitled.

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      Most definitely.

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      What about those that have never worked and lived off the tax payer all their lives.
      BTW, the tax most tax payers pay all their working lives, when adjusted for inflation and a 30% portion put aside would give pensioners less than 65% of todays pension.
      You might feel you are entitled, but that doesn’t make you right.

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    Quote from Debbie McTaggart’s “Reliance on Age Care Pension” article above …. “The report supports an already compelling case for a complete and forensic review of retirement incomes, including the inclusion of the family home in the asset test. Currently, an age pensioner could live in a property worth $3 million and have modest savings and still receive an Age Pension. Surely this can’t be right?” – Close quote. …….. I think this is wrong and unfair because it could very well be that the age pensioner has worked really hard all his/her working years to get that family home, which was probably not ever thought of at that time, of carrying a value in the millions of dollars. So assuming that the house was worth around $500,000 10-12 years ago, it is not the fault of the age pensioner that the property has now risen in value to some millions of dollars. Can the age pensioner eat his/her family home? Can you get money out of bricks and mortar?? If the age pensioner does not have any income coming into the household, then it is only right that he/she receives the pension and that the family home should not be asset assessed and the pension removed from the age pensioner because he/she has this million dollar home. Or is it soon to be that aged and old pensioners will be driven out of their family homes to go where??? … in the twilight and sunset stages of their lives. This does not seem right at all, is cruel and totally un-Australian.

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      Absolutely! Just because your house goes up in value while you continue to live in it and pay/paid the mortgage is not a reason to include it in the asset test. It cannot be realised or generate income until you sell it which you won’t normally do until you have to move to retirement or nursing home or die. If you buy a $3m home just so you can claim the pension, that is a different story and could be considered.

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    I agree with emps – pay everyone the pension and then treat everyone the exact same under the income taxation regime is the only way to resolve the current morass of retirement income issues.

    I only agree with inclusion of family home that is in excess of the value for the area in which that home sits – if you bought (I know someone who did) a nice little spot way up near Barrenjoey for $180k years ago, and it’s now worth a couple of mill – you still have to live there and it doesn’t generate income.

    A home is a home – not an income-generating asset.

    Where there is excessive input into that home to hoard wealth and then receive pension, there is a case, but it seems to me the real intent of this approach is to enforce down-sizing by retirees, thus putting more properties on the market to feed the only current viable ‘industry’ in Oz – what smarter people than I call ‘house flipping’, with all its protections by governments.

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    A lt of people forget that say 30 years ago people bought their houses , fibro and brick in a new suburb. Well 30 years later that suburb is now mainly occupied by rich people so their houses are still the same but the value has gone heaven woods as they say. The pollies in WA were going to start a new tax on the value of houses , and amid mass opposition from the public . it was stopped. With all the waste by pollies , maybe their performance should be tied to their super. If they can privatize etc from their poor performance, their should be a yard stick on how much they get. Don

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    The age pension is for those who are unable to fund their retirement to provide a reasonable living standard.
    Now the cries will be that those people should have worked harder which is on a par with Joe Hockey’s statement that “if you want to buy a house get a decent job”.
    The only way you can understand another situation is to “walk in their shoes”. Many people worked very hard in poorly paid jobs just as many people worked all their lives in the Public Service and retired on a very nice superannuation.
    The situation with the family home being included as an asset is based upon the scenario of someone receiving support from the public purse while they are sitting on a multi million dollar property. They are in fact asset rich even altho’ they may be income poor.
    To look at it a little differently should someone living in a hovel worth next to nothing get a pension if they own a Rolls Royce valued at a million dollars? Again asset rich but income poor. You all may scoff but the principle is the same.

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      Very few people realise that those nurses, teachers, police retiring on a very nice superannuation paid dearly for it.

      The super was paid after tax with no 9% guarantee in most cases.
      It was a hefty amount after tax and was compulsory.

      If invested in real estate the same amount could have bought 8 to 9 houses over the 40 odd years it was paid into the fund.

      Returns were dreadful.

      The only thing going for it was that the pension if taken in full was about two thirds of final income and CPI adjusted.

      Very few public servants made it to the end to claim what theoretically was a whole lot of after tax savings.

      Perhaps if all workers had been forced to save in this way instead of having access to their earnings to spend as they liked then they too might have a very nice superannuation as you describe it.

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      So, Tom Tank, you support the idea that someone who worked two jobs and lived in a caravan for 5 years so they could raise a good deposit on a home, then sacrificed holidays and nights out for 20 years to pay it off, should be denied a pension while someone who spent their money on overseas holidays and restaurant dinners and fancy clothes should have their retirement funded from the public purse?

      We need incentives for people to struggle to acquire a home, not penalties for being responsible and sacrificing lifestyle to build security for old age. I don’t support the idea that people should be able to put millions into a home to escape the assets test, but neither should battlers be penalized for working hard and making sacrifices to ensure greater comfort in old age. People who acted responsibly are entitled to their reward. People should have the right to make spending choices without penalty. The current pension system is unfair in the extreme and counting the family home as an asset would make it a thousand times worse.

      It’s also not been noted that home owners struggle with rising rates and insurance and maintenance bills, and without the rent assistance renters get, these expenses can be hard to bear. Yet selling to downsize is very costly. Maybe the government should consider stamp duty exemptions and assistance to meet removal costs and agent fees for retirees wanting to downsize. That might encourage some whose house values have inflated to downsize and use part of the house proceeds to improve their lifestyle. At present, everything is geared to indulging the cheats, manipulators and irresponsible and punishing those who work hard, plan, save, and sacrifice to try to be at least partly self-sufficient.

  6. 0
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    We are born naked, wet, and hungry. Then things get worse.

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    I agree that buying a home 30 years ago that cost say 75,000 dollars now worth so much more and calling it an asset to determine old age pension is hardly fair on pensioners. I also agree that those able to invest in properties over the years and get special lurks to avoid tax while their portfolios grow and young folks have no to little chance to purchase a home is grossly unfair. I did not read the whole article and can’t see the possible bias therein. Did the author report what the percentage was say 20 years ago, before the superannuation thing started? Certainly the logic is, if one has a job, then one gets superannuation, and if they get superannuation and they are able to keep a job for a good number of years they will have a private pension to draw on.
    I really dislike the finger pointing going on here about who gets what and why. We need to think about the best for everyone. It probably isn’t fair as costs of living goes up to expect people on fixed incomes to cope. It probably isn’t fair that Joe Hocky’s wife can purchase their Canberra home out of his expense account. I do think if there were appropriate and reasonable arrangements for older people to locate into more modest and more affordable accommodation they would do so. The facts are, at every turn, we oldies are dealing with a lot of sharks that want to get a hold of what we have, be it retirement villages, home care packages, nursing homes and the like.

    It is very easy to be duped and the story with our bib banks playing with peoples retirement funds, and such added to being cheated by buying a retirement village home, and such makes everyone feel very cautious about making any moves.

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    One important thing when claiming people are in multi million dollar houses and including this in the asset test, is that they conveniently forget the value of the land puts up the price, regardless of the state and size of the house, and the renovations required to keep it liveable. The price of the land is driven up by locations which are now favoured by investors and overseas buyers or by scarcity which is decided by governments in releasing land for building. In a lot of cases, particularly with old houses, the house is purchased for the land it sits on, and quite often is demolished for a rebuild. The home owner has very little say in this, so is it fair that the family home is valued at the land/house market price for asset testing? Is it fair that such a home owner is forced to sell and move away from the area they are used to for social contacts and friends?

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      I agree, this is not fair at all. The family home does not generate any income, for most elderly folks like us this is the only lifetime investment and we live in our home. Not our fault that housing and property prices have increased dramatically, our homes can’t give us money to live on unless we sell and where do we go from there?? I think overseas investors should be stopped from purchasing into the residential property market unless they are truly Australian citizens WITHOUT dual citizenship. Wealthy overseas investors are pushing up home prices to unrealistic heights, then developing the smallest block of land where there was once a humble house, into villas, unit and high rise buildings. So now the government, in their grab for money, is looking at asset testing the family home as a reason to stop or reduce the pension! This is not fair for age pensioners and old folks who have no control of spiralling property prices. How about the government first try to make ends meet by looking at themselves first + removing all perks that retired politicians continue to receive forever!! such as chauffeur driven cars, overseas trips, travel allowance (what for, when they have retired?).

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    Of course, people are relying more and more on the Aged Pension. One of the main reasons for this is the low interest rates imposed by the RBA which gives us lower returns on safer investments like term deposits. With the economy the way it is a lot of people are very wary about risking their money in any option greater than a 2% to 4% earner. Housing sales certainly aren’t on any upswing because of the ailing confidence in the flagging economy. This is a situation which feeds upon itself and worsens without remedial action such as raising interest rates, for a start. The Australian dollar’s value is continually falling making the prices of imports greater and our purchasing power is being lessened accordingly. This is all just common sense and yet the stupid government does nothing but manage by crisis and try to increase federal revenue by penalising the workers with higher taxes, levies, duties, etc, rather than stimulating the economy by making more disposable income available. This is simple Economics 101 stuff and yet the ignorant, inept, greedy, hypocritical, selfish, and, oh yes, egotistical federal government politicians can’t see, understand or care about doing a thing to correct out desperate plight. Pathetic! God help us!

  10. 0
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    Money for pensions has to found some where and if the over seas multi nationals do not pay their fair share of tax where else can it come from.You people just can’t get it.

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      Multi-nationals provide employment and the same rules apply to them as with local companies. They pay taxes according to the law. Many individuals do not pay their fair share of taxes ( or any tax) but these same people are the largest group of users of Government services.

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