Superannuation, the ultimate government cash cow?

[sptrawler]

I love all this media uproar about the suggestion, that low income earners should be able to take a pay rise rather than a super contribution, as though they will be able to access the money later and it wont cost them part of their pension.

 

[sptrawler]

Identity theft and loss of super, how easy it is apparently, this is a must read. IMO

https://www.smh.com.au/business/com...ver-5-million-share-scam-20190917-p52s46.html

From the article:
A young Melbourne woman has been charged following an investigation by the Australian Federal Police and the corporate regulator into a major fraud and identity theft syndicate involving some of the country's biggest superannuation funds.


Federal police Acting Commander Chris Goldsmith has asked Australians to check their super balances as quickly as possible as it wrestles to stamp out an alleged fraud it has described as being run by a global network.

"We allege the woman attempted to steal $1.5 million as part of a sophisticated global network," he told a press conference on Tuesday. Acting Commander Goldsmith said the total fraud could be as high as $10 million.

 

[sptrawler]

Interesting observation:
https://www.smh.com.au/politics/fed...ine-of-retirement-review-20190927-p52vkf.html

From the article:
National Seniors' chief advocate Ian Henschke said past changes to the age pension taper rate meant people with $800,000 in savings were now up to $12,000 a year worse off than people who had savings of $400,000 .

If as expected the low interest, low inflation climate is going to persist for an extended period, there is very little point in saving for your retirement. IMO

 

[Knobby22]

It was the Libs who brought in that taper rate.
It's all about taxing into a surplus as I can attest with my wage.

Can this government look at fairer taxing and ensure forein companies that are ripping millions out of our economy to tax havens pay their share? After all they enjoy Australia's infrastructure and laws.

They had an episode of Utopia loosely based on this issue and it didn't end well for the citizens.

 

[sptrawler]

It was the Libs who brought in that taper rate.
It's all about taxing into a surplus as I can attest with my wage.
.

It sounds as though there will be a review into the super system, I guess there will be lots of reviews and modifications as the system matures.
In reality it is really just doing a full circle, where a percentage of your tax pays for your pension, as it was originally.
The only obvious difference, is the managing of the money has been privatised.

 

[Knobby22]

It sounds as though there will be a review into the super system, I guess there will be lots of reviews and modifications as the system matures.
In reality it is really just doing a full circle, where a percentage of your tax pays for your pension, as it was originally.
The only obvious difference, is the managing of the money has been privatised.

A proper review is a good chance to set the future direction and achieve something in government. Hopefully not have it end up as just a privatised pension.

 

[sptrawler]

Early stages of the review, but Labor and the Industry funds aren't happy that a critic of labors franking credit changes, is on the review panel.
https://www.smh.com.au/politics/fed...anking-credit-campaigner-20190930-p52w6x.html

From the article:
They knew when they appointed Professor Ralston it would be hard for Labor to sign up to conclusions reached by the panel when she has been such a prominent, well-known and dedicated campaigner against the Labor Party," he said.

Professor Ralston told The Sydney Morning Herald and The Age that she was not a "political person" but found Labor's franking credit policy to be "pretty inequitable".
"People in large funds with pension accounts were largely unaffected, while self-managed super funds in pension mode and older people with no super and a few shares would have been badly affected," she said. "The numbers clearly demonstrated that. I was very careful throughout to steer clear of politicians and remain as apolitical as possible".

The good thing to take from their opposition, is that obviously Labor and the Industry funds are still after SMSF franking credits and their members.

 

[sptrawler]

Interesting article on the state of super.

https://thenewdaily.com.au/finance/superannuation/2019/12/20/retiring-boomers-super-funds/

from the article:
The above chart, from Household, Income and Labour Dynamics in Australia (HILDA) at Melbourne University, shows the reliance on the age pension for over 50 per cent of income has declined significantly in recent years for all but the over-80 group, despite population ageing.
That means the budget will not be hit dramatically by population ageing, and projections from the Australian Taxation Office show the move away from pension-funded retirements will grow significantly.


Source: ATO
By 2023, 43 per cent of retirees will be self-funded when they leave the workforce, compared to only 22 per cent at the turn of the century.
APRA also found that super members are getting cannier and will move their money out of funds they no longer like or trust. Over the past five years there have been times when outward rollover flows from the system have spiked. But they have usually been quickly caught up by the overall growth in the super system.

It is important to note these rollovers are mainly not removals from the super pool, except for cases when the money was placed in self-managed funds. SMSFs, while they amount to one quarter of total super assets at $746 billion, only account for some 9 per cent of members and their growth has slowed in recent years.

 

[sptrawler]

Another article explaining the plight of self funded retirees.
https://www.abc.net.au/news/2019-12...n-retiree-savings/11829548?WT.ac=statenews_wa
Fom the article, I think this is an important issue, for those going for a part pension:
Call for lower deeming rate
With interest rates forecast to remain at, or exceed, record lows, self-funded retirees are looking for financial protection through other sources, including government policy.

Last month, WA Self Funded Retirees Incorporated (WASFR) made a pre-budget submission to the Federal Government outlining nine recommendations to improve the financial position of its members.

Among the recommendations was a call to lower the deeming rate — the assumed return on a person's financial assets, which is used by the Government to determine pension eligibility — to 2 per cent.

Currently, single retirees are presumed to earn 3 per cent per year on financial assets of more than $51,800 (a rate of 1 per cent applies on savings up to the threshold).

For couples, the 3 per cent rate applies to combined financial assets worth more than $86,200.

 

[Humid]

Retirement sounds harder than working
You can all the cheap money you like but without the income security to pay it back who wants it

 

[sptrawler]

Retirement sounds harder than working
You can all the cheap money you like but without the income security to pay it back who wants it

It is a lot different now, than it was when term deposits were getting 8-12%, now they are getting 1.5-1.7%.
So $1m is getting $15-17k, so people have to take on more risk or run down the principle and access a pension.
The problem a lot find, it is hard to change their personal characteristics, once a saver always a saver. Therefore they find they are stressed, unhappy and feel they are somewhat failing, if their capital is running down fast.

When you are working, there is always the knowledge the money is coming into the bank, whether you need it or not.
You make a bad decision, uh who cares, I will just wait a couple of months and the money is back up.
That is the first thing that hits you when you retire, if you lose some money or make a bad investment, it ain't coming back unless you make a good investment or tighten the belt.

 

[Belli]

Oh well, they seem to have fallen for the siren call of yield and perceived safety of cash rather than a growing income stream from shares of which LICs and two ETFs are my poison of choice.

My dividend income for the calendar year has increased and it has also increased so far this FY due to owning more of the things. Maybe they also tend to look or hear about day-to-day fluctuations in shares and forget about time. If my aged memory is correct the ASX Accumulation index 10 years ago was close to 40,000 and now it is over 75,000.

That and knowing how to budget, ie expenditure v income but they no longer appear to have sufficient income. Bad side of the equation.

 

[qldfrog]

I think they remember when they last invested their savings in 2007 and are still well below after inflation now...

 

[Belli]

I think they remember when they last invested their savings in 2007 and are still well below after inflation now...

Well remember a few who ran scared and went to cash. I'm not overly sympathetic as some threw a few comments if I mentioned I was still in shares and poo pooed me for my approach.

From the couple of people I still contact from time to time, they are still in cash but I don't appreciate the view held by one (who I no longer have any association with) who was somewhat derisory of my lifestyle, i.e. Only the well off can put solar on, install double glazing etc.

And yet he was formerly bragging how much he made per week which was more than my late wife and I were getting in a month.

Two households on the same income levels can end up with different result. Depends on what they do with their income during their working lives. As I said to one accountant, others can shop at DJ's while we shop at Target and when retired we can choose to shop at DJs while they will be obliged to shop at Target.

 

[sptrawler]

Oh well, they seem to have fallen for the siren call of yield and perceived safety of cash rather than a growing income stream from shares of which LICs and two ETFs are my poison of choice.

My dividend income for the calendar year has increased and it has also increased so far this FY due to owning more of the things. Maybe they also tend to look or hear about day-to-day fluctuations in shares and forget about time. If my aged memory is correct the ASX Accumulation index 10 years ago was close to 40,000 and now it is over 75,000.

That and knowing how to budget, ie expenditure v income but they no longer appear to have sufficient income. Bad side of the equation.

A lot of older people have only accumulated by saving and never invested, also interest rates have never been this low, long term average is about 7%.
Add to this the memory of the 1987 stock market crash and other events like 'storm' financial collapse and understandably some are scared.
I feel sorry for anyone who has saved for their retirement and now they get there it isn't as rosy as they hoped, be that for poor investment choices, investments gone bad or not investing at all.
Retirement for people who have worked and paid tax for 50 years, should be pleasurable. IMO

 

[Belli]

A lot of older people have only accumulated by saving and never invested, also interest rates have never been this low, long term average is about 7%.
Add to this the memory of the 1987 stock market crash and other events like 'storm' financial collapse and understandably some are scared.
I feel sorry for anyone who has saved for their retirement and now they get there it isn't as rosy as they hoped, be that for poor investment choices, investments gone bad or not investing at all.
Retirement for people who have worked and paid tax for 50 years, should be pleasurable. IMO

Fair points.

However, I guess what irks me is when I mix with others I sometimes get a feeling a few view it is unfair I am able able to do stuff they cannot. Not a lot but enough of them. Well there ain't no contract with life so the It ain't fair clause doesn't exist. Like others I went through 1987 and 2000 and 2007 as they did but I hung in there whereas they bailed at various stages. The result for me has been good but by some it's considered unfair. No it isn't. They made choices as did I. They should (but probably won't or cannot) accept responsibility for the outcome of their choice.

As for Storm I did hear about it obviously and read some of the submissions made to the Review. While I will not excuse any malpractice by the financial institutions those submissions revealed a lot about people. Some too scared to insist they get their money out, to outright greed by others with a smattering of everything else in between.

No matter what the situation if people don't have a great outcome they rarely express a view that the cause may partially be their fault to various degrees. It's people.

 

[sptrawler]

Fair points.

However, I guess what irks me is when I mix with others I sometimes get a feeling a few view it is unfair I am able able to do stuff they cannot. Not a lot but enough of them. Well there ain't no contract with life so the It ain't fair clause doesn't exist. Like others I went through 1987 and 2000 and 2007 as they did but I hung in there whereas they bailed at various stages. The result for me has been good but by some it's considered unfair. No it isn't. They made choices as did I. They should (but probably won't or cannot) accept responsibility for the outcome of their choice.

As for Storm I did hear about it obviously and read some of the submissions made to the Review. While I will not excuse any malpractice by the financial institutions those submissions revealed a lot about people. Some too scared to insist they get their money out, to outright greed by others with a smattering of everything else in between.

No matter what the situation if people don't have a great outcome they rarely express a view that the cause may partially be their fault to various degrees. It's people.

I agree with your points and they are right, I have friends who have been workmates right through my career, they enjoyed themselves spent everything they earned + some.
Now they are retired they are on a full pension, with about $250k in super and to tell you the truth they are in a pretty good position.
Some other friends are on public service pensions, they are really happy they stayed in the old Government pension schemes, but tend to be the smuggest of all which isn't a good look.
What irks me is those that want to trash people like you and me and others, that saved and are self funded, I always thought the sacrifices would have been respected.
Well that has been proven wrong, as now we are held up for ridicule and scorn, by those who want to blame us for any misfortune they find themselves in.
Which in reality probably has always been the case, all that has changed is social media and the media in general gives them the platform to vent their hate.

So I have more time, for those that

 

[Triple B]

So I have more time, for those that

Did the power go out SPT?

 

[sptrawler]

Did the power go out SPT?

My apologies, I was dragged off at a moments notice, grandchildren misbehaving.
So as I was saying, I have more time for those that have tried and failed, than for those who have never tried at all, but criticise those that did.
Too many today are looking for someone to blame for failure, rather than aspiring to overcome adversity. IMO
By the way I'm becoming a convert to Belli's LIC, ETF pathway, I think as I get older it will suit our travelling lifestyle, that is if the money holds out.

 

[Belli]

Be so easy to have a rant so I'll have a small one.

Gets up my nose when a number of commentators consider I and a number of my peers have been very naughty and stuff money away in super and elsewhere. Well, it is a view but mine is I have not done anything which was not legal at the time.

While I may personally disagree it was done, it was Parliament which passed legislation to refund excess franking credits - and I might add the proposal was supported by Labor if people bothered to search Hansard for Simon Crean's speech on the subject. It was also Howard/Costello which turned superannuation into the second biggest tax rort by allowing tax-free pensions for those over 60. Absolutely no logic to that in my mind (why not 59 years and 2 days or 63 year and five and half months?)

But the legislation was passed and I abide by the law as should every other person who used or may use those laws, both past and present, to assist them reach their financial aspirations.

As an aside I threw that issue about refund franking being initially supported by Labor to one candidate and he looked, um, somewhat uncomfortable.

Anyways I think, although the matter is now closed, it was so poorly sold and many people were insulted, especially those who held only a few shares, to be in effect called thieves. Didn't go down well. No matter which way the election went it wouldn't have stopped me investing. I was investing before those refunds were introduced so why would I stop?

Now this country has a problem. Like many I want people to receive subsidised pharmaceuticals (prepared to pay $2k per month for MS medication are we rather than $40?), our youth to receive funding for their education, public hospital care, publicly funded research, welfare for those in need. However, where are teh funds because it's out 'tradition" to whinge about being taxed yet attempt to suck up any freebies as it's our right ya know.

It's all part of the reason why I am increasing my international allocation both personally and in the SMSF. My assessment is this country is in danger of loosing its spark and becoming complacent. We no longer seem eager to embrace change. Because do do so is uncomfortable.

So ends the rant of this old fart who is close to 70 years of age.