# Super funds



## Sir Osisofliver (25 June 2009)

http://www.news.com.au/business/money/story/0,28323,25687497-14327,00.html

You know,  I'm not shocked.  I've been saying it for years.


Cheers

Sir O


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## Boggo (25 June 2009)

Says a lot about the performance of 'financial planners' in my opinion.

As long as the commissions are rolling in etc etc.


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## Julia (25 June 2009)

I wonder how accurate the statements are in that article?

e.g. this is a quote from it:



> New Zealand's age pension, for example, is worth about 80 per cent more.



Unless there's been an astonishing rise in the last few months, this is simply untrue.  The NZ pension - when currency difference is accounted for - is only slightly more than that paid in Australia.   Certainly it's not means tested, but it's taxed which limits the amount paid in higher earners.


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## Kez180 (25 June 2009)

Boggo said:


> Says a lot about the performance of 'financial planners' in my opinion.
> 
> As long as the commissions are rolling in etc etc.




Its the fund managers in this instance....


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## Julia (25 June 2009)

I've just checked the NZ pension rate and it's almost exactly the same as in Australia.  So I wouldn't be relying on any other assertions in that article.


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## Nyden (25 June 2009)

Julia said:


> I wonder how accurate the statements are in that article?
> 
> e.g. this is a quote from it:
> 
> ...




What's the cost of living over there, though? Perhaps property / rent isn't as inflated in NZ - and thus the entire weekly pension isn't eaten up on rent?


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## Julia (25 June 2009)

I don't know about rent, Nyden, but given property prices are fairly similar, I doubt it would be much cheaper.   Occasionally I compare e.g. rates, electricity etc with friends there, and overall it's also similar.


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## Kez180 (25 June 2009)

Julia said:


> I don't know about rent, Nyden, but given property prices are fairly similar, I doubt it would be much cheaper.   Occasionally I compare e.g. rates, electricity etc with friends there, and overall it's also similar.




I know beer in NZ is WAY cheaper... most produce/generic food is also allot cheaper... and they have beautiful seafood...


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## Timmy (25 June 2009)

Julia said:


> I wonder how accurate the statements are in that article?
> 
> e.g. this is a quote from it:
> 
> ...




The article seems to quote directly from the report.  It is an OECD report, so I would expect it to be pretty reliable ... but when I read the report ... well I can't make head nor tail out of what it is saying.

The 80% figure comes from the section of the report that specifically talks about Australia, here is what it says:

_"The high  risk of old-age poverty  in Australia  is mainly due  to  the  relatively  low  level of  the age pension: 
equivalent  schemes  in  other  OECD  countries  are  worth  25%  more  (compared  with  national  average 
earnings) than the age pension in Australia.  New Zealand’s basic pension, for example, is worth 80% more 
relative to average earnings than the age pension."_ 

That is my underlining.  I underlined it because I want to ask, what on earth does it mean?  Makes no sense to me.  Are NZ average earnings that much lower than in Australia, so making the NZ pension a higher pension in terms of comparison to the average wage?  I don't know.

The basic single pension in NZ is $363.50 per week gross (http://www.winz.govt.nz/manuals-and...s_rates/new_zealand_superannuation_tables.htm)

The basic single pension in Aus. is $284.90 (http://www.fahcsia.gov.au/guides_acts/ssg/ssguide-5/ssguide-5.1/ssguide-5.1.8/ssguide-5.1.8.10.html)

I think those figures are taken at slightly different times, so may wont be 100% right, but the order of magnitude difference should be about indicative.  

On a different note, I noticed a link in the article from The Australian to a February article, saying:
_ALMOST 400,000 millionaires are receiving the age pension and 51,200 people in the nation's top income bracket also are getting the welfare payment.

The research by NATSEM shows 14 per cent of the nation's 2.8 million pensioners have an average net worth of more than $1.6 million when the value of their home is taken into account._

I was stunned by this (maybe I should read the paper more regularly).  So, if you own a million dollar home you can still get a pension?  There's a lot of talk about welfare-dependence on this forum, aborigines this, unemployed that, single mothers etc. ... probably going to touch on a nerve, but is anyone else flabbergasted by this?


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## Krusty the Klown (25 June 2009)

Timmy said:


> I was stunned by this (maybe I should read the paper more regularly).  So, if you own a million dollar home you can still get a pension?  There's a lot of talk about welfare-dependence on this forum, aborigines this, unemployed that, single mothers etc. ... probably going to touch on a nerve, but is anyone else flabbergasted by this?




That's correct, the family home is exempt when it comes to the asset test for the aged pension.


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## Mr J (25 June 2009)

Timmy said:


> I was stunned by this (maybe I should read the paper more regularly).  So, if you own a million dollar home you can still get a pension?  There's a lot of talk about welfare-dependence on this forum, aborigines this, unemployed that, single mothers etc. ... probably going to touch on a nerve, but is anyone else flabbergasted by this?




Why? They're just getting back some of the taxes they have paid over the years.


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## Prospector (25 June 2009)

Timmy said:


> I was stunned by this (maybe I should read the paper more regularly).  So, if you own a million dollar home you can still get a pension?  There's a lot of talk about welfare-dependence on this forum, aborigines this, unemployed that, single mothers etc. ... probably going to touch on a nerve, but is anyone else flabbergasted by this?




I agree with it.  Think about a couple who have lived in an area all their 40 years of married lives. Normal jobs; mum probably stayed at home and didnt work.  Not wealthy in terms of $$ in the Bank, but they own their house and they have money to pay their bills. Close to the city, convenient, probably a very large '1/4 acre' block.  Over the 40 years they have been living there, other properties nearby have been bought, the house bulldozed, and multi units installed.  Or the suburb becomes popular because of its proximity to the city.  So now the house is worth $1.2million.  That wont pay the bills though. After 40 years are they supposed to sell?


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## drsmith (25 June 2009)

Prospector said:


> I agree with it.  Think about a couple who have lived in an area all their 40 years of married lives. Normal jobs; mum probably stayed at home and didnt work.  Not wealthy in terms of $$ in the Bank, but they own their house and they have money to pay their bills. Close to the city, convenient, probably a very large '1/4 acre' block.  Over the 40 years they have been living there, other properties nearby have been bought, the house bulldozed, and multi units installed.  Or the suburb becomes popular because of its proximity to the city.  So now the house is worth $1.2million.  That wont pay the bills though. After 40 years are they supposed to sell?



Several years ago some bright spark in the then WA state Labor government decided it would be a good idea to introduce a 2%pa "premium property tax" on residential properties valued at $1m or more. 

Once it was realised that people in the above situation who were cash poor (pensioners) may be foced to sell to pay the tax, the proposal was modified so that in that situation the debt would accumulate till death and be paid out of the estate.

It was then quickly labelled a death duty and was subsequently dropped.


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## gav (25 June 2009)

Prospector said:


> I agree with it.  Think about a couple who have lived in an area all their 40 years of married lives. Normal jobs; mum probably stayed at home and didnt work.  Not wealthy in terms of $$ in the Bank, but they own their house and they have money to pay their bills. Close to the city, convenient, probably a very large '1/4 acre' block.  Over the 40 years they have been living there, other properties nearby have been bought, the house bulldozed, and multi units installed.  Or the suburb becomes popular because of its proximity to the city.  So now the house is worth $1.2million.  That wont pay the bills though. After 40 years are they supposed to sell?




Well considering other assets count towards whether they receive the pension, why shouldn't the family home?

I could have $300K worth of assets  and own an average house worth $500K and be one year off retirement.  Knowing my assets will make me ineligible for the pension, I could sell these assets and buy a $800K home so I could receive the pension.


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## Krusty the Klown (25 June 2009)

When you think about inflation and the way markets rise, most outright home owners residence will eventually be worth more than $1M in the next 50 years. 

The cost of living will rise accordingly also. So $1M won't buy that much in the future.

Australian Government theory is that social security is a safety net, not a right, like the age pension is in NZ, where everybody of age pension receives it regardless of how wealthy they are.


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## Krusty the Klown (25 June 2009)

gav said:


> Well considering other assets count towards whether they receive the pension, why shouldn't the family home?
> 
> I could have $300K worth of assets  and own an average house worth $500K and be one year off retirement.  Knowing my assets will make me ineligible for the pension, I could sell these assets and buy a $800K home so I could receive the pension.




Would you really want to tie up $300K worth of assets just to get $14K p.a. pension? 

A 5% return on $300K would get you $15K and still have access to the capital when needed.


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## gav (25 June 2009)

Krusty the Klown said:


> Would you really want to tie up $300K worth of assets just to get $14K p.a. pension?
> 
> A 5% return on $300K would get you $15K and still have access to the capital when needed.




Point taken.  

However, two people could have the exact same value of assets - one decided to buy an expensive home, the other buys a cheaper home but has other valuable assets.  Why should the second person be penalised?


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## Timmy (25 June 2009)

Krusty the Klown said:


> Would you really want to tie up $300K worth of assets just to get $14K p.a. pension?
> 
> A 5% return on $300K would get you $15K and still have access to the capital when needed.




Krusty, there seem to be a sizeable number of people doing just this, or thereabouts, if that article I quoted from is correct (it puts the number at 400,000 millionaires drawing the pension)?  

ps. Apologies to Sir O for hijacking the thread.


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## Krusty the Klown (25 June 2009)

gav said:


> Point taken.
> 
> However, two people could have the exact same value of assets - one decided to buy an expensive home, the other buys a cheaper home but has other valuable assets.  Why should the second person be penalised?




Or has the same value of financial assets, but does not own a home.

They shouldn't, your right, it weighs in favour of the homeowner. A case of having to work the system to your advantage.


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## Krusty the Klown (25 June 2009)

Timmy said:


> Krusty, there seem to be a sizeable number of people doing just this, or thereabouts, if that article I quoted from is correct (it puts the number at 400,000 millionaires drawing the pension)?
> 
> ps. Apologies to Sir O for hijacking the thread.




400,000 seems quite a high figure for Australia doesn't it? 

Is it just me? I find it hard to believe there are that many millionaires in Australia (let alone pensioner millionaires), the last statistics I saw was around 35,000 and that was about 2-3 years ago, but the figures I saw could be inaccurate.

But then again, I can't disprove it either.


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## theasxgorilla (25 June 2009)

Sir Osisofliver said:


> http://www.news.com.au/business/money/story/0,28323,25687497-14327,00.html
> 
> You know,  I'm not shocked.  I've been saying it for years.
> 
> ...




What exactly have you been saying for years? 

Isn't this a function of the high equities exposure of most superfunds?  I mean the article even suggests that.  And it's only measuring returns/losses for 2008... I mean, c'mon, anyone who invests and is worth their salt knows you need to review a performance record, where 10 years is typically better than 5.

IF the long term performance shows inferior returns, I still wouldn't throw the baby out with the bath water.  Superannuation needs to evolve.  Become more sophisticated.  Why do I never hear the word _hedging_ in discussions involving superannuation?

What do we expect when everyone has such a large proportion of their investible capital exposed to long-only equities funds and we have a financial crisis and share market collapse???

I (we) know someone who gave away in '08 what he made in '07.  And he made a LOT in '07!  Measuring '08 alone doesn't tell us much.  The general rule of thumb applies, the bigger your gains, the bigger your drawdowns.  BTW, the person I'm referring to above made a proverbial _killing_ from '02-'06.

ASX.G


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## gooner (25 June 2009)

IMHO should be no distinction between principal place of residence and other assets when it comes to the pension. There are plenty of providers who will provide equity access for seniors to get at the value in the family home. Having millionaires cry poor because it is tied up in the family home is ridiculous - they should just borrow against it.

The pension is designed to be the last resort for people who do not have enough assets/income, not a trough to feed from, so that the family home can be given to the kids

In a world with an ageing population and limited resources, providing pensions to rich people is frankly obscene


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## Julia (25 June 2009)

gav said:


> Well considering other assets count towards whether they receive the pension, why shouldn't the family home?
> 
> I could have $300K worth of assets  and own an average house worth $500K and be one year off retirement.  Knowing my assets will make me ineligible for the pension, I could sell these assets and buy a $800K home so I could receive the pension.



Hopefully you wouldn't be so silly as to do this.



Krusty the Klown said:


> Australian Government theory is that social security is a safety net, not a right, like the age pension is in NZ, where everybody of age pension receives it regardless of how wealthy they are.



True.  But bear in mind that (unless this has changed since I lived there) there's no tax free threshold in NZ and tax rates are (were) higher than here.  The age pension is fully taxable.




Timmy said:


> The 80% figure comes from the section of the report that specifically talks about Australia, here is what it says:
> 
> _"The high  risk of old-age poverty  in Australia  is mainly due  to  the  relatively  low  level of  the age pension:
> equivalent  schemes  in  other  OECD  countries  are  worth  25%  more  (compared  with  national  average
> ...



Thanks for providing that detail, Timmy.  I still don't get it either.
When currency difference is taken into account, there's only a few dollars difference between the A and NZ pension amounts.






> The basic single pension in NZ is $363.50 per week gross (http://www.winz.govt.nz/manuals-and...s_rates/new_zealand_superannuation_tables.htm)
> 
> The basic single pension in Aus. is $284.90 (http://www.fahcsia.gov.au/guides_acts/ssg/ssguide-5/ssguide-5.1/ssguide-5.1.8/ssguide-5.1.8.10.html)
> 
> ...



_
I think this constitutes those people who get as little as $1 per fortnight of pension. It's a sliding scale payment, (asset and income tested), don't know the actual figures.

It's probably a bit like the way they assess the unemployment figures, i.e. if you work one hour a week or something you are deemed to be employed.

So if you receive 10 cents of age pension, you will be included in the stats of those "receiving the age pension".  So maybe not as bad as you think, Timmy.



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