Retirement: the risk is all yours

The risk of funding retirement income has well and truly shifted – and now it’s all yours.

Retired couple look over their retirement finances with concern for risk

You may have noticed the sharp drop in the share market recently. If you’re working full time, then it’s probably no big deal. You’ll just shrug your shoulders and wait until the market comes back. But if you’re retired and your income depends upon the health of the Australian Stock Exchange, it’s a very big deal. A deal breaker, in fact.

You may have spent 40 or 50 years in the workforce and remember well the promise of the golden years of retirement. So since when did your financial – and therefore emotional – health depend upon external factors over which you have zero control? Are you beginning to feel helpless, confused and fearful about outliving your savings? You are not alone.

Or to phrase this question more specifically, when did the risk of retirement shift from your employer and the Commonwealth Government to individuals such as yourself? When did the promise of an easier life after fulltime work simply vanish into thin air?

The story of retirement in Australia is a long one, with many twists and turns, but there are four discernible epochs that chart the change in the allocation of risk in retirement. These are:

  • the introduction of the Age Pension in 1908, when the state assumed a role in alleviating old-age poverty
  • the rise of the welfare state post World War II, which saw a consolidation of this state responsibility
  • the rise in neo-conservative political ideology in the 1980s, which supported the notion that the (economic) market knows best and that individuals must now assume responsibility for their own financial wellbeing
  • the introduction of mandatory superannuation in Australia in 1992.

The introduction of superannuation was a unique and bold response to the call, led by trade unions, for a fairer system that allowed ordinary working people to have retirement savings as well as the (mainly male) professionals who were the chief beneficiaries of defined benefit company and public service pensions. Yet, as magnificent a reform as super was, leaving the savings for the market to manage and monetise can be seen, in retrospect, to be a huge flaw.


Currently, despite being described in the early 90s by the World Bank as world’s best practice, our mandatory superannuation system has not worked at all well for ordinary workers for a range of reasons.

Firstly, any system that is based upon a percentage of wages or salary earned is bound to be inequitable to those on lower salaries or with a fragmented work history. So from the outset, those with more will have even more when they retire. And those with less will suffer by comparison.

There has also been little regulatory pressure on the way superannuation is managed, particularly in relation to the fees charged, resulting in fees applied to Australian superannuation savings now ranking the third highest of the 34 Organisation for Economic Co-operation and Development (OECD) countries.

And, lastly, another problem is that successive government policy changes have resulted in a stop–start approach to the percentage of super required to be paid by employers – i.e. the super guarantee charge (SCG) – thus reducing the final nest egg from that planned (at a rate of 15 per cent SGC) to a much lower rate, currently stalled at 9.5 per cent. This amount is simply not enough to fund the expected longevity of today’s retirees.

In fact, instead of the wellbeing of retirees sitting at the centre of retirement income policy, it is fair to say that the financial services industry, which has emerged since the introduction of mandatory superannuation, is the really big winner. Typified by an ongoing lack of transparency and endemic conflict of interests, it really does seem that Dracula remains well and truly in charge of the ‘super’ blood bank.

So where does the Age Pension fit into this situation? Surely it’s still there for those who need it? Well, not entirely. Nearly 70 per cent of Australian retirees are currently receiving a full or part Age Pension. But as recent OECD research confirms, at least one-third of Australian pensioners are living in poverty. The pension is simply inadequate to cover basic household expenses.

Also, last year’s federal budget introduced measures to reduce access to the Age Pension, starting in 2017. So many Australians who did their sums based on current income and assets tests will find they really do need to exist on a much lower income stream than they were led to believe when they first started planning their retirement income.

Had the superannuation system been allowed to mature with regular increases in the SGC, far higher savings would now be in place to support those entering retirement. An example quoted by Industry Funds Super suggests this amount is as high as an additional $108,000 over a working lifetime for a male currently aged 50.

Put simply, our current system is not working for the greater good. And repeated calls for a full review of our retirement income system remain unanswered. So a piecemeal approach to retirement income policy, using ad hoc levers of tax, salary sacrifice and pension rules, delivers little real benefit for those who need it the most and a great deal of uncertainty for those brave souls still attempting to save enough to fund themselves in their later years.

Today’s retirees are facing tough new pressures, including likelihood of dementia, financing their own aged care and housing affordability. So the bonus that they are likely to live 20 years longer than their parents’ generation can begin to feel more like a burden when it comes to funding these extra years.

Our current conservative government is part of a global ‘coalition’ of governments eager to crack down on pension spending, even though the Australian Age Pension is inadequate – the third meanest in the OECD. And this situation is exacerbated for renters. Property prices are high, as are rentals. With a median rent in Melbourne of nearly $400 per week, the base rate of the single Age Pension at $350 weekly makes it unsurprising that homeless statistics reveal a steep increase in the number of homeless people aged 50 and over, particularly women.

Where once an annual return on share investments or cash might have been expected to range between five and 10 per cent, a collapse in share prices and record low interest rates now mean a three per cent return is a best-case scenario.

So why don’t older people just work longer? Many try, but regular employment is increasingly difficult to get. There are only so many Bunnings in the land. Those aged 50 or over often find that age discrimination rules, and resign themselves to an average wait of more than a year before, if they are fortunate, they can secure another job.

So if you’re feeling concerned about your financial future in retirement, it’s with good cause. The risk of funding retirement income risk has well and truly shifted – and now it’s all yours.


    To make a comment, please register or login
    3rd Mar 2016
    Well I am 72 Years old and very healthy and all i have as income to live day to day is my pension but unfortunately i am not prepare to lock myself on one room on a share accommodation with other people that are not my family.

    I have 3 beautiful kids they are working hard and I am not going to become a burden for them so this is my history..... maybe I help someone to live a productive and dignified life in retirement .... without worries and full of happiness.

    I retire at 65 and continue working as a IT teacher with a satisfying results but then in 2012 i start looking at the future of the country and my future options.
    I look Australia, Look at my original country, Look other South Asian countries to assess my future .... ??? What to do ..??Where to go ..??Stay in Australia ???.

    I look at my financial situation and all I had was my pension (average $1,600 per month) Wowowowo I calculate my expenses ...Rent food medical entertaiment car expenses ELECTRICITY .. Water ... and I found that I got left if I was lucky just a few dollars on my pocket.

    I look at my benefits ...$2.50 x day on public transport, free public hospital .... Home assistance .... Gov. Housing (very long list - but I apply anyway) etc.

    Yes all nice but not sufficient for a nice life .... just live on a room until I die or in a public house with many neighbours problems ....NO BLOODY WAY .... I have to do much better than this so this is what I did ..

    1.- Investigate other countries financial opportunities (Living expenses - Rent food etc)
    2.- After a long investigation of Australian situation and other countries I found that Australia was going to be on a very bad financial position for us retire people with only a pension (Increase in cost of living, rents and much more ...and look what happened today ...very scary for all of us - please exclude those with other income like rentals or superannuation income ... maybe they are ok, happy for them )
    2.- I look to move to Bali, Thailand, South American countries etc. so ....
    3. I decide to move to Thailand (Close to my Kids - Cheap to live, great weather, nice food, good beach etc etc)

    So I move to Thailand and this is what I am doing with my $1,600 Australian dollars pension:

    1.- Found a companion that can share life with me, great (nice and happy person) - Everybody say Thai women takes all your money ???? What money $1,6000 x month ???? So what ... I am very happy sharing what I have.

    2.- I am paying for a block of land and will build small home by about Aug 2016 (Currently renting)
    3.- Building a new Hydroponic equipment to produce and sell Hydroponic in my area.
    4.- Planting avocados and other plants for consumption and sell on the markets (Lots of fun) currently I am selling tomatoes I am growing .....

    5.- My basic expenditure:

    Rent = $145 x month (North of Thailand) or about $350 on the coast beach side
    Food = $300 x month (Including meat, chicken veggies eggs ...everything we need)
    Entertainment = $200 x month
    Electricity = $12 x month
    Phone: $40 x Month (Mobile with internet and international calls)
    Internet= $24 x month (Fast - Unlimited)

    Total = $721
    Left for building = about $800 x month (or 20,000B - Thai money - lots of money)

    So this is my history as a 72 years old retire person living overseas.
    I use to earn over $120,000 x year and pay all my taxes (Lots of taxes) Pay mortgage and the rest I have pay my duties as an Australian for many many years ...... Now is my time to live a live a productive and dignified life in retirement ..... I have pay lots of money for other retired persons during my working like.

    I hope I provide a positive attitude for you retire people ..... Do not worry be Happy and enjoy the rest of your life do not listen to anybody.
    If you still married the same and probably better

    Have fun and live a happy happy time do not think to much just do what you think is best for you ..... do not complain he he he
    10th Mar 2016
    Great story Aussie you took the bit between your teeth and did what was best for you.
    Good to see a pensioner not whinging as they do on this forum and all the best for your long and prosperous future
    14th Mar 2016
    ''I use to earn over $120,000 x year and pay all my taxes (Lots of taxes) Pay mortgage and the rest I have pay my duties as an Australian for many many years''

    No, you didn't pay your dues, Aussie. From that income, you should be self-supporting now and not claiming an aged pension. It's people like you who have created the problems we now face in Australia - where the less advantaged are hurting while too many who enjoyed great advantage are taking an unfair share. Now you are chest-beating and pretending you are smart. I find that offensive - especially since I don't have the option to live abroad unless I am prepared to be selfish and irresponsible and leave my daughter to struggle alone to care for her disabled son. But guess what? She gets NOTHING to help pay for the specialist care her child needs, because the privileged are getting pensions and tax concessions they neither need nor deserve and that's draining the coffers and leaving needy disabled children out in the cold.

    10th Mar 2016
    Happy Jack and Merry Martha above look like they are about to throw in the towel. Situations CAN seem worse if you let them. Whenever things seem like they are going in the wrong direction I find it a challenge to change them, and so far so good. Attitude is probably the biggest asset we have to face adversity. A good attitude can help in any negative circumstance.
    10th Mar 2016
    Well Aussie, great story

    but the government is now trying to stop people getting a pension who live overseas for more than 6 weeks. So where will that leave you ?
    10th Mar 2016
    Wrong Bletch, that new rule only applies to pensioners that travel overseas. You can move permanently and receive the Aussie pension.
    10th Mar 2016
    Hi retired Knowall I hope you are right but in previous columns here
    after 6 weeks overseas your pension is cut. This has got through the lower house and is awaiting upper house approval.
    Paicey58 is of the same opinion ??
    10th Mar 2016
    Bletch, your reference only affects those on the DSP. Age pensioners will still receive a full pension regardless of time spent overseas. They will, however, lose the Pension Supplement, which covers telephone, mobility and utilities allowances, which seems fair as they won't be paying out for these in Australia.
    10th Mar 2016
    Good luck to Aussie ! Sounds a lovely person & has a great lifestyle all worked out. But its not an option for everyone.

    Anyone with chronic disease or disability needs good medical back up. My husband needs a lung specialist & I need Rheumatologist & blood tests. Not even largish country towns have them, let alone Asian country areas.

    Dont see how anyone can plan for retirement ! Look at the changes since we started work in the 60's.

    Who knew the interest rates we paid on our home loan - up to 20% - could drop to 3% ? Our plan was pay off house first. Then pay into Super. Who knew Gov would suddenly force us to pay Super for our Staff ?

    Weren't too worried. Had the business to sell. Who knew the Global Financial crisis would mean the business sold at half price ?

    Next plan was: put that cash aside for to pay future utilities on house & to pay future Health Ins & not burden an overloaded Public Health system.

    Now our part pension is threatened because we own a home & have that small amount set aside. So how can you plan anything ?
    10th Mar 2016
    and bottom line is elderly people on a pension do not need this kind of stress in their lives at this time when they should be enjoying life not worrying how to make ends meet.
    10th Mar 2016
    I for one will be looking closely at the new election with the new party called seniors party and what they have to say.
    I am so disappointed with both major parties.
    10th Mar 2016
    That's fine Supernan but as pensions and entitlements come out of taxes, you might enlighten us as to the percentage of tax you paid against gross income on your business. I used to work in finance and then became self employed on the same gross income. My tax bill went from about 32% down to less than 9% because all of my outgoings that were my responsibility suddenly became a business expense.
    10th Mar 2016
    I hope this idyllic world will continue for you Aussie.
    Unfortunately I thought I heard recently that the Australian government has changed the rules regarding people living overseas and getting an Australian pension. I think you will only be allowed to stay for six weeks at a time before you pension is cut off. Could be wrong but if I'm right you won't be able to live in Thailand the way you are at the moment for much longer.
    10th Mar 2016
    That is my understanding too Paicey58
    10th Mar 2016
    Paicey58, the changes affect those on the DSP. Age pensioners will still receive a full pension regardless of time spent overseas. They will, however, lose the Pension Supplement, which covers telephone, mobility and utilities allowances, which seems fair as they won't be paying out for these in Australia.
    10th Mar 2016
    Thanks Old Man
    10th Mar 2016
    Good luck to Aussie, but I believe the powers to be are intending to stop people like you to have a life in retirement. On the other hand, people like Hockey who rorted the travel allowance to the tune of several multilples of $288 a night, lied and cheated when he and his wife bought their Canberra Holiday house, and now is off to the US, pocketing a tax free Government supplied pension of over $350000 a year plus his tax free diplomatic salary. I don't see anyone cutting off HIS pension after 6 weeks. It is estimated a possible 560000 affected retirees will NEVER vote for those Blasted Liberals ever again.
    14th Mar 2016
    I sure hope that's the case, Mike. I certainly won't ever vote LNP again. As I see it, they are creating a feudal society, and that's not what I want Australia to be. I don't much like Labor, but I'll vote for them to get rid of the LNP. I won't vote Independent because I fear splitting the vote will advantage the LNP, and at this point in time I think the priority is to get rid of them. We can worry about keeping Labor honest later, though we certainly will need to make Labor much more accountable than they have been in the past.

    10th Mar 2016
    No matter what this government tells you today can be changed tomorrow, or even tonight, and if they can make the changes to be retrospective in any way, shape, or form they will I would suggest not getting too jubilant over any promises or hints of same which might seem to better the current superannuation or pension situation (plight). This two-faced government with Captain Turnabout at the helm is out to get every last drop of monetary blood out of each and every one of us, and don't delude yourself for one microsecond about that. Go for every entitlement (that you have WORKED so hard for) that you can possibly think of, keep Centrestink up to date with your dwindling asset figures. And keep abreast of all new, and old, rules, regulations, and legislation to be sure you are not missing out monetarily on your Pension. This government scum is not interested in anyone but themselves and their big business mates who contribute big bucks to the political party to look after them. The rich get richer and the poor get poorer. Can you honesty name ONE, just ONE, thing the present government has done of a positive nature for Aged Pensioners or anyone who is retired and not once a politician? NO, and neither can I!
    10th Mar 2016
    Did Aussie really say he was earning $120,000 a year but couldn't afford to retire here?
    11th Mar 2016
    Yes, he's moving back to La La Land.
    14th Mar 2016
    Yes. And this demonstrates one of the major problems we have in this country. People who draw excellent wages live extravagantly and refuse to save, and then the taxpayer has to support them. Meanwhile the disadvantaged don't get enough - because the extravagant and irresponsible take more than their share. And the battlers who go without to save are deprived of a fair reward for their endeavours, thus removing the incentive to save and creating more like Aussie who beat their chest and boast about their 'smarts' while taking other people's fair entitlements to support a lifestyle they don't deserve.
    11th Mar 2016
    With the pension about $1,000 fortnight with supplements, $800 a month can be easily saved. best to base income on the aged pension and if your super fails and their is nothing left you have your pension and all those savings. It's simple.
    14th Mar 2016
    Actually, it's not, Pixapd, because every cent you save costs you under this stupid system successive governments have created. If you happen to be over the new threshold - temporarily, because you might find next week your are $100,000 or more poorer due to stock market crashes - you are deprived of $78 per year for every $1000 you save. Given that you can't earn more than 3% (and possibly not that much) for $1000 of savings (and your earning might in fact be well into negative territory), you are effectively being fined $48 or more per year every time you put $1000 in the bank. How stupid is that? What kind of imbecile tries to tell the populace that the nation can SAVE money by punishing people for being responsible and trying to provide for themselves?

    As for saving $800 a month ''easily' from an income of $1000 per fortnight, I think you are dreaming. It may be possible for some, but it will depend on a host of variables - health and physical capacity, family situation, where (geographically) you live, etc. etc. etc. I think one of our major problems in Australia today is that too many folk work on assumptions rather than fact, and generalize rather than recognizing that individual circumstances vary enormously.
    14th Mar 2016
    It's every simple for the wise..those who pray..those who 'owe nothing' those who think matters through, who pay NOTHING of their savings, at all
    14th Mar 2016
    No, Pixapd. It's very simple for those who can't see past their own noses. I owe nothing. I think matters through. I manage money very well. But I have needs that many don't encounter due to health and family issues. For example, I have a daughter who lives abroad. I either have to save aggressively to be able to afford to visit her, or spend a lot extra to entertain her when she can manage to come home, or not see her at all. Gifts are more costly because of high postage costs (or high costs to buy them online from businesses located close to her). I can't make little things for her as I do for my other children.

    You do not help anyone by generalizing and making assumptions. If you pray, pray to learn to have more empathy and understanding and tolerance and to be less arrogant, because a ''holier than though'' attitude and blaming others for their situation is cruel and anti-social and totally unhelpful in finding solutions.

    We all need to walk a mile in the shoes of others before pretending to have answers, and the answers you suggest are based on flawed assumptions that make your suggestions unrealistic, unfair, and in some circumstances downright cruel.
    11th Mar 2016
    There are two Draculas feeding on our blood; the Government and the financial services industry. Surprise, surprise; the retiree dies from loss of blood!

    14th Mar 2016
    There is only one way to manage the risk, and that is to get rid of this cruel government and then mount a concerted campaign demanding a fair go for retirees and a future for Australians. We need to make the younger generation understand that this is THEIR future, and it's in THEIR interests to insist that retirees be dealt with fairly. Selfishness will come back to bite them, big time!

    We need to get across the message that being lazy and short-sighted will do massive harm to the economy and society. For example, the stupid change to the taper rate. It punishes people for saving - taking $78 per year for every $1000 they saved when they can probably only earn $30 per year, so they are handing $48 a year to the government for every $1000 they saved. Who will be motivated to save for retirement with stupid rules like this in place?
    It doesn't, of course impact on the rich and privileged. If you have more than $1.1 million (as a homeowner couple) it doesn't affect you - though it might as stock market collapses reduce your capital! It doesn't impact on the dishonest, who gave their money to their kids before age 60 and/or invested in very expensive housing to cheat their way through the means test or who successfully hid their wealth. It doesn't impose too much on under 60s, who have some planning options open to them. It won't hurt the very elderly much. But it totally screws 60 to 70-year-olds who are honest and planned responsibly for retirement, stripping them of up to $12000 a year in income and benefits AFTER they suffered the halving of their retirement income due to falling investment returns. And in doing so it removes all incentive for honesty and responsible planning, saving and investing, thus ensuring more pensioners in the future. It even provides a huge incentive for those impacted unfairly to go on a spending spree! How stupid is that?

    Somehow, we have to get through to government the message that we are not as stupid as they are or as they think. We know the right answers. What we need to do is DEMAND that they implement sound policy and stop these stupid, short-sighted, self-serving short-cuts to national bankruptcy and social upheaval.
    14th Mar 2016
    Hi Rainey, and others

    Had you noticed that in the Pension Legislation changes, effective as from 1 Jan 2017 that the NEW thresholds, will be FROZEN for 3 Years as from 1 July 2017.
    15th Mar 2016
    That was brought to my attention recently, Rodent. I had missed it initially. It's NOT acceptable. This government HAS to go. We did our bit for this country. The government is breaching a contract it entered into with us decades ago. It has an obligation and it is reneging on that obligation and discriminating against retirees. No other group has been persecuted to the same degree.
    Not Senile Yet!
    15th Mar 2016
    And Good Luck to you with...Total Freedom to do as you please.....well as long as you don't wish to take YOUR money out of OUR scheme that is......cannot allow that...can we????
    Best wishes and kindest regards,
    Don't forget to vote for me next election will ya...
    Your Local Party Puppet MP!
    Not Senile Yet!
    15th Mar 2016
    Bletch and Retired Know it attention.....
    The 6 weeks oversea rule applies to ALL Pension...disability or Aged.
    Haven't you heard?????
    ALL Pensions are NOW WELFARE PAYMENTS......and you have to be in Australia to receive them!!!!
    No exceptions...the Govt is Broke...they need to cuts costs!!!!!
    There is a desperate need to finance a new Master Defence Plan White Paper Policy,,,,,,and it will cost 80 Billion!!!!!!
    Now that is important... old Farts who don't work and pay tax anymore are NOT!!!! They are just liabilities!!!!
    What's next you ask?????
    At Age 75...along with a Birthday Card.....will come an end of your Life paid for by us through medicare!!!!
    Just think...blissfull perment Sleep.....and no more problems!!!!
    Not for you... or for Us!!!!
    9th Feb 2018
    When you leave Australia for more than 26 weeks

    Your rate will depend on how long you were an Australian resident between the age of 16 and age pension age.

    If you were an Australian resident for:

    35 years or more your rate normally won’t change;
    less than 35 years you’ll normally get a lower rate, for example, if you were a resident for 10 years you’ll get 10/35ths of your usual rate

    Your rate normally won’t change if you:

    were an Australian resident for 25 years or more, and
    were getting Age Pension or another Australian social security payment while living outside Australia on 1 July 2014
    4th Mar 2018
    Spot on froggy! Those are the new rules; a lot of people forget the compulsory health insurance and the remittance (at the moment
    $US1500 per month per person for Indonesia). Aussie pensions alone most probably will no longer be enough.

    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles