Retirement Income Review highlights the great divide between retirees

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The government’s long-awaited Retirement Income Review has been met with mediocre fanfare, with not much in it for current retirees and younger Australians potentially the victims of what one media outlet is calling ‘pick-pocketing’.

Unsurprisingly, the report paints a pretty picture for older people who’ve had a lengthy working life, a reasonable superannuation balance and own their home.

But retirement looks grim for those who haven’t had a great work history or who don’t own their home.

Women, lower-income renters, people not covered by the superannuation guarantee, involuntary retirees, Aboriginal and Torres Strait Islander people and those with a disability will do it toughest, says the report.

Australian Council of Social Services (ACOSS) chief Dr Cassandra Goldie said: “We must fix the mounting inequality in our retirement incomes system, which sees people on high incomes benefit greatly from generous superannuation tax concessions, at a cost of tens of billions per year to the federal budget.”

The report found that older renters relying on JobSeeker payments before reaching Age Pension age are the most financially vulnerable retirees.

“The report shows people over 65 who do not own their own home are really struggling to keep a roof over their head, with 48 per cent living in poverty,” said Dr Goldie.

“Also, a growing number of older people are stuck on the poverty-inducing Jobseeker payment, with 42 per cent of people on JobSeeker over 45 years of age.

“We urgently need to increase the Rent Assistance payment received by people on income support, and to lift Jobseeker payment permanently to a decent level. In addition, we must invest in social housing to boost dwelling numbers across the country. These are without doubt the most effective way to lift the living standards of older people in greatest hardship.”

The 638-page review does not make any recommendations, but federal treasurer Josh Frydenberg says it will inform future policy making.

One such policy rumoured to be in his sights is scrapping the legislated compulsory super guarantee (SG) from the current 9.5 per cent to the promised 12 per cent by 2025.

The report suggests that any increase to the SG will come at the cost of wages.

“A rate of compulsory superannuation that would result in people having an increase in their living standards in retirement may involve an unacceptable reduction in living standards prior to retirement, particularly for lower-income earners,” says the report.

The treasurer, while not yet committing to winding back the legislated increase, is making noises to suggest he will.

“The key point to underline here is that we are living in a very different economic environment than we were this time last year. We have been subject, as a nation and a global economy, to a once-in-a-century economic shock with COVID-19,” he said.

The government assumes that any money saved by employees in compulsory super contributions will equate to wage increases.

An increase in wages is what the government should be pushing for, as such a move could spark the economy and pull us out of recession faster.

But there is no guarantee employers will add more money to your pay packet, and if the SG increase does not go ahead, workers will also have less money for retirement.

As journalist Geoff Maurice puts it, this is a hidden hand grenade that could blow up your retirement.

“So, you’re being told to give up your retirement income boost because it could discourage your boss from giving you a pay rise. You’re not actually being given anything in return,” writes Mr Maurice.

“It’s not a great sell. No wonder it’s being hidden behind the sleight of hand of a 600-page review into the retirement system, an involved and complicated cover for a money grab.

“It will be a six-month process, but it’s still a matter of having your pocket picked.

“Being mugged is less offensive. At least a mugger is upfront.”

ACOSS says the government should at least consider increasing the SG to 10 per cent as legislated but reconsider any further increases.

“We support the increase to the Super Guarantee from 9.5 per cent to 10 per cent of wages in July 2021 as collective pay agreements may already include this increase and on its own is likely to have minimal impact,” said Dr Goldie.

“For increases beyond 10 per cent, we need to see the evidence on whether it’s worthwhile for people with low and modest incomes to save more for retirement, given much of the increased contributions are likely to come out of future pay rises.

“In the absence of fundamental reform of the tax concessions as we propose, increases to compulsory super contributions beyond 10 per cent would be of doubtful benefit to people with low incomes who face greater financial pressure during working life, and are more likely to achieve close to income replacement in retirement at a 10 per cent contribution level.”

The group also says removing excessive post-retirement tax breaks could help properly fund aged care.

“At a time when aged care is grossly under-funded, and the cost of fixing this is about to rise rapidly, it makes no sense to continue to exempt super fund earnings (interest, dividends and capital gains paid to super funds) from income tax,” said Dr Goldie.

“This exemption should have been removed years ago when super benefits paid to members were made tax free.

“To properly fund aged care and health services for an ageing population, ACOSS is calling for superannuation fund earnings after retirement to be taxed at the same rate as in the ‘accumulation’ phase (15 per cent), minus a tax credit for people on the lowest incomes. This would raise $5 billion a year in the short term and much more in later years.”

The Association of Independent Retirees (AIR) says the review provides a “much-needed fact-based assessment of the three pillars of the Age Pension, compulsory superannuation and private savings that are the foundation of Australia’s retirement income system”.

AIR president Wayne Strandquist welcomes the review.

“Retirement income derived by self-funded retirees can be drawn from one or any combination of the three pillars of Australia’s retirement income system and self-funded retirees have a direct interest in any changes that may be contemplated by the government as a result of the review panel report,” said Mr Strandquist.

“The Association of Independent Retirees is pleased to note that the key observation of the review panel was that ‘the Australian retirement income is effective; sound and its costs are sustainable’.

“This observation provides a sound basis for consideration of any changes that may arise from the report to address issues of inequity and ensuring the system delivers a retirement income that achieves a reasonable balance in relation to working life earnings and retirement income.”

Mr Strandquist says any assistance the government can give self-funded retirees in the form of tax concessions and encouraging them to fund their own retirement will, in turn, help the government by decreasing dependence on the Age Pension and other payments.

“Self-funded retirees need to be sure that they have adequate savings to fund their retirement for a multitude of reasons apart from funding a reasonable standard of living,” said Mr Strandquist.

“These reasons being having sufficient funds invested to ride out economic instability in instances such as the GFC and COVID-19, cover inflation affecting the cost of living, providing for higher healthcare costs in old age, providing for residential aged care if required, and providing for times of low-interest rates.”

What do you think of the ACOSS suggestions? How much do you know about the Retirement Income Review? Are you happy with the direction it could take future policy?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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64 Comments

Total Comments: 64
  1. 0
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    Hate to say it & Dec not looking for an argument, but who voted this current government in?? We can only thank them for this mess, they do nothing to help the battlers & hard working tax payersvin this country. Only look after the wealthy croney mates & their own retirements & living conditions! Nothing will change while these guys “run” & mismanage this country!

    • 0
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      Be a bit fair – the other mob did not give us anything either apart from an extra 2 years waiting for the age pension. I am not in love with the current mob either but this constant bleating about the current Govt gets tiresome. Most of the moaners probably have not paid a lot of income taxes in their lives anyway.

    • 0
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      You would sooner have full blown communism? Better off changing your attitude and stop feeling sorry for yourself. Poor life choices and refusal to change the bad choices is the usual cause of a bad retirement.

    • 0
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      Agree re the other mob Mariner. Tho i believe I’ve paid my fair share of tax & will be ok, tho not well off by any means in retirement but I do worry for those less fortunate thru no fault of their own who have worked hard to stay afloat all their life & barely getting by (unless they are dependant on alcohol, smokes, drugs, pokies & tattoos, etc- tho I don’t av a problem with these if it affects no one else & they are able to afford them as well as the other bills, half their luck!!

      I still work & earn a decent wage but the cost of living even very basicly seems to be so much higher than the Job seeker/Unemployment payment or low incomes & this is plain cruel for those with rent & mortgages.

      No wonder so many are homeless or living in vehicles etc. It is so very sad.

    • 0
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      It could be worse, we could have socialist Labor with their financial ineptness running the circus.

    • 0
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      Mogo51 you need to get out more
      The Coalition have given a new meaning to financial ineptness-
      Josh is even trying to put a spin on the SG staying at 9.5% while he sits back on his tax payer funded 15.5% what a laughing stock of a treasurer can’t add up given us a two trillion dollar debt in the pipe line 40 billion dollars of outdated Subs we wont see in our lifetime stuffed the NBN overpriced land deals China buying our port every where you look you see dud decisions from our current Government or rorting on steroids

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      As ever eraser your take on the ‘facts’ is askew. Frydenburg admitted, as did his minions, that it was an addition error, not a deliberate fudge as you would like us to believe. Your socialist pin up, Turnbull, was responsible for the submarine fiasco; again another bullseye you missed. The NBN fiasco was little “fuzzy face” Rudds baby, further messed up by Turnbull; two more missed bullseyes. China’s long term rental of Darwin’s port was not approved by the current treasurer. You haven’t shown any rorting anywhere in your article; so i guess it’s another two bullseyes you missed. Better go back to the firing range for more practice.

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      Great spin Old Silver fox
      i could add in the sports rort Robo debt and it just goes on and on
      the Minister’s all get to vote on these matters
      so they all share the blame
      stop reading the herald Sun and start thinking for your self

    • 0
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      Eraser, great to see you are in possession of all the facts and you faculties…not.

    • 0
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      Old Silver Fox at least you make me smile with your inane comments

  2. 0
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    “Self-funded retirees need to be sure that they have adequate savings to fund their retirement”.
    There must be some way that I don’t know about that I, already being a SMR, can magically increase my saving and hence, returns, to take me above the poverty line or at least up to the level of income of the well off Old Age Pensioner.
    Yes, not all OAP are well off and as mentioned in the article, owning a house helps.

    • 0
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      Agree, if only it were so simple

    • 0
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      Actually Kram, you could draw down on some capital! The Retirement Income Review has already flagged that too many retirees die with large savings which they could have used. And before you start, I am also an SFR but happy to draw down so we can live comfortably without stressing, or being jealous of Pensioners

    • 0
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      Dear Sundays. A sensible reply.
      When I can get no top up work (I’m in my 70s), I do draw down, which means that the capital is less and hence the future dividends will be less, a downward spiral, and this is just to achieve a comparable living standard of a ‘comfortable’ OAP with all the benefits.

      It is the lowering of the assets level to acquire the pension that has created this problem having saved but not saved enough.

    • 0
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      Oh !! shock horror SFR’s may have to spend some of there capital to survive….

      What’s the world coming too….

    • 0
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      Obviously panos you never saved for your old age…a decision you obviously regret. Lived up to and spent every cent you earned; and now moan about your third rate quality of life as a pensioner.

    • 0
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      I have no problem with you rolling around in your riches, enjoy….. but it seems if SFR’s have to touch that capital, it gets really nasty…….

      They can live on the interest but not that capital…..

  3. 0
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    Congratulations Dr Goldie you have won the battle to get self funded retirees below pension poverty. Many self funded retirees are now worse off than aged pensioners. Unless you can save $4 million plus you are better off in retirement with little or nothing,

    • 0
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      Yes Willie I totally concur. Pensioners are given numerous concessions that makes their dollar go further yet a lot still moan about how tough life is. Maybe changing their lifestyle would help. Also educating their children and grandchildren on the importance of making correct choices. The list goes on.

    • 0
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      With super funds returning in the 8-9% for balanced pension funds, many SFRs with this type of super are much better off than on the pension. With lower super balances full or part pensions can also be received. It is also worth noting that one can have well over a million in super and also get the low income health care card, which has similar PBS entitlements, transport and energy concessions to those on a Pension Card.

    • 0
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      Very few if any super funds are returning 8-9% with most around 5% mark.

      Have you tried getting Seniors Health Care Card lately? It’s one the hardest puzzles I’ve ever me.

  4. 0
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    The sooner a universal OAP is paid and overseen by the tax department the better! The real $ stats will then be known & adjustments made. The present method does not work and the world has moved on from the age of the typewriter.

    • 0
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      Communist governments have tried this before Lescol. Do a bit of research into Venezuela and tell me you would prefer their system to the one Australia has. Wishing for stuff like that only ever brings bad outcomes.

    • 0
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      Makes sense but would take a very long term plan to sort out
      Interesting to note that that NZ and the US do this but we can’t here. (Very strange to even harbour the thought that these countries could ever be considered centres of communism by some??)

    • 0
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      OSF, where does Venezuela and communism figure in Lescols comment?

      Most western nations have a universal pension scheme and by the way, Australia is the only country with an Income and Asset Test.

      A universal pension is easily achievable in Australia by changing the tax system and getting rid of tax loopholes that favor the richest people and politcans in our society.

  5. 0
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    I would be surprised if employers give any pay increases if the Super Guarantee remains the same. For many their super is the only money they will have on retirement. Rather than increase in rent assistance, I would prefer more social housing. It would assist in homelessness and a boost to the economy through building

    • 0
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      What makes you think people have been getting pay increases over the last 10 years? It is a furphy to suggest that increasing super contributions will result in loss of wage rises.

    • 0
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      It’s not a furphy. Many businesses are complaining that they can’t afford to pay an increase in Super, they certainly won’t provide pay increases above CPI unless mandated. Originally employees gave up pay increases in return for increases to Super. The Government may prefer an increase to wages instead , but it won’t happen. Bit like trickle down economics.

    • 0
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      Do you mean ” gush up economics “……..

  6. 0
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    For some years now we have been told that relying on the mandated super contributions is not enough and we should be contributing a minimum of 15%. This means we should all be making additional payments, and yet most are not. Those of us that do, are then threatened with losing it when it comes to retirement and decried as being ‘wealthy’ or ‘rich’ by those who didn’t bother and stand with their hands out for more welfare to be taken from those who tried to look after themselves.

    Whilst it may be true that the entire superannuation system needs to be revisited, I for one am sick of hearing that it is ‘unfair’ and those who don’t/can’t/won’t work are disadvantaged by those who do/can/will. When are those who make sacrifices over their entire working lives in order to ensure a reasonably comfortable retirement going to be rewarded and not punished for doing so? Most of us who do this are not rich, we have lived all the same ‘life events’ (good and bad) as anyone else but made different choices in order to have a less stressful retirement. And yes that may have included buying a home. Stop trying to get your hands on my hard won savings.

    • 0
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      KSS, here here! I totally agree. Where the compulsory superannuation system went wrong is that the burden was not shared by employer and employee; 7.5% each from the very beginning. If anyone thinks that’s unachievable then think for a moment that Australians are the world’s largest gamblers and do pretty well in the drinking stakes too. If instead of gambling on whatever people bet on, the same money was gambled on living to 65 and beyond many people would now enjoy a better retirement. Gambling isn’t an ‘industry’s it makes nothing beyond misery and broken homes.
      I would tell ACOSS and their poverty industry to change their tack, keep your hands off my hard work and tax paid savings and instead teach people some basic financial literacy, to try ‘hands on’ instead of ‘hands out’ and that every personal choice has its consequences that you have to live with.
      Rewarding failure and punishing success will bring us all down because without incentives the whole system fails. Try the USSR for example.

  7. 0
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    I see another kick in the guts for retirees.

  8. 0
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    Governments need money. They cant go to the people who have none, they go to the people who’ve saved. Why then is it such a surprise when self funded retirees get hit on in every budget. Theyre the only ones with money saved and cash in super.
    Go and stand at any public boat ramp on a Sunday to see where the youth of today are putting their extra money. (60thousand dollar utes and 25thousand dollar jetskis.)
    If people of a certain bent continue to save for their future then the Government of the day will chase it and somehow take it. There is no other ‘spare’ money out there.

    • 0
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      Totally agree. If you reward stupid behaviour you get more of it. Socialism has never worked because the hard and smart workers get fed up supporting the rest. The rich already have got their money out of the country. This leaves the middle class who get taxed out of oblivion and get no freebies for their hard work. Australians should stop their whinging – they don’t know how lucky they are. The education system needs a huge overhaul to teach the young – work ethics, budgeting, investing and values like respect, tolerance and humility.

    • 0
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      ” This leaves the middle class who get taxed out of oblivion and get no freebies for their hard work. Australians should stop their whinging – they don’t know how lucky they are. “

      Yes, I obviously don’t know how lucky I am.. !!!!!!!!!!!!!!!! Tax me some more please…..

    • 0
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      Sorry panos you are one of the whingers.
      The ATO needs to double your tax.

    • 0
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      They don’t need to I pay enough !!!

  9. 0
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    What else did you expect from the Liberal Party they have no time for working people only the big end of town, when you voted for them did you really expect a fair go.Wake up you people.

  10. 0
    0

    Surely a Review is just that. It’s not legislation, it’s not government policy, it’s just a bunch of ideas put forward by a group of people who can write reviews, some of whom are trying to justify their place on the panel. Remember, every year,. regardless of who is in government, Treasury puts forward the suggestion that the family home should be included as an asset in respect of pensions and each year the government rejects the suggestion.

    Can we wait for the government’s response please?

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