Superannuation, the ultimate government cash cow?

[sptrawler]

Now why on earth would he say that? It has nothing to do with his Industry Super Fund style. Like you said SP, some people choose to have a SMSF because they would rather pay $1,000 a year in fees for a portfolio full of term deposits and they know and are happy with earning less. Some people don't want any risk.

The thing Mr. Silk (if he said that) needs to realise is that Industry Super funds charge much higher fees for large accounts and pay way less for cash deposits. So why should anyone be happy with 1.5 to 2% for cash when they can get 2.6% with term deposits in a SMSF with much less fees?

I think we are just at the beginning, of the long road, that ends with the Government taking over our super and giving it back to us as a pension.

 

[Zaxon]

I think we are just at the beginning, of the long road, that ends with the Government taking over our super and giving it back to us as a pension.

And then means testing it, so if you've got any money outside of super, then you're not eligible for your new government/super pension.

 

[Belli]

Totally disillusioned with super. It's been a political football ever since it came into being. Rather regret having an SMSF now. Was great at the time and extremely useful in our circumstances then but not now. Probably I got sucked in through all the wonderful tax breaks and all that crap. If you've got enough outside super you probably don't actually need it.

I'm fining it very tedious to deal with it now.

 

[HelloU]

Nothing really has changed over the last few years with the exception of actually defining what this money is for - and so limits have been prescribed on retained amounts. A good thing in my opinion.

I think some of the "outrage" and "concern" has arisen because many had forgotten that they actually have a Self Managed Superannuation Fund ........ because for 20 years all they had was a Self Superannuation Fund. Sure, they had to decide between WBC or CBA shares but it has been a pretty standard playbook.

There is a reason they are called "Managed".

 

[Knobby22]

I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
Better to get a life and let them do it for you.
Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
I'm really happy with Australian Super and Ian Silk.

 

[Darc Knight]

I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
Better to get a life and let them do it for you.
.

The Accounting profession for one promoted it. More fees for them.

 

[sptrawler]

And then means testing it, so if you've got any money outside of super, then you're not eligible for your new government/super pension.

Then we will have gone full circle, again.

 

[Ferret]

I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
Better to get a life and let them do it for you.
Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
I'm really happy with Australian Super and Ian Silk.

Agree 100%.

Industry funds cop a bit of a bagging here on ASF, maybe because of peoples political leanings. I have much of my retirement savings in an industry fund balanced option and it's performed really well over the long term. And they do all of the book keeping for me.

I also have some of the industry fund in the "Direct Investment Option" where I can do my stock picking. I find the stock picking a bit of fun, but I think the balanced fund has out performed me over the years!

 

[willy1111]

I don't understand why so many people have set up SMSF. Hard work, more fees, and hard to outperform Industry Super funds.
Better to get a life and let them do it for you.
Obviously if you were with AMP or the banks it is a different story. Lousy returns and high fees may make it worthwhile. Honestly though I know someone who ruined their super returns and I am sure there are many out there.
I'm really happy with Australian Super and Ian Silk.

I guess it depends on your point of view and willingness to learn new skills.

I don't think it is hard work, nor do I think it is more fees, nor do I think it is hard to outperform Industry Funds.

We are all different and I am glad I have the option of having an smsf.

 

[sptrawler]

I guess it depends on your point of view and willingness to learn new skills.

I don't think it is hard work, nor do I think it is more fees, nor do I think it is hard to outperform Industry Funds.

We are all different and I am glad I have the option of having an smsf.

I agree with you, my fees are $850 per annum, it is just a case of downloading my comsec and bank statements then emailing them.
If that is hard and complicated, people shouldn't bother investing in the first place.

 

[IFocus]

Knobby are there not industry funds and then industry funds?

As they are not all equal

My SMSF fees are $800 / year

 

[Knobby22]

Knobby are there not industry funds and then industry funds?

As they are not all equal

My SMSF fees are $800 / year

Who are you with or how did you work it out IFocus?
My administration fee is $1.50 per week.
There is also the insurance that covers for death, disability and income protection of $21 per month.
Last year's return was 11.08% which I think is pretty good. This gives me a mix of assets. I went partly international shares during that time as well as balanced.
I know there are hidden fees e.g to the management of International Shares.

I invest personally outside super but for my piece of mind, less stress, and for my family's sake I keep my super fairly conservative and I have to say it's really built up. I only started adding additional contributions this month.

 

[IFocus]

I am with Esuper fees are actually $900 per year includes audit etc.

I asked as a bloke I know in the industry told me industry funds are excellent but don't assume they are all excellent some are not.

Check the funds that you have parked your money in they all charge management fees that don't show up on statements you need to read the actual prospectus to find out, any thing over 1% is to much a lot charge 2.5% which is scandalous.

BTW good work on adding more.

 

[Bill M]

A very good read. I've only shown 3 paragraphs. The full story is here:

https://www.superguide.com.au/retirement-planning/stop-political-bullying-retirees-fair-go

---
Stop political bullying: Retirees deserve respect and a ‘fair go’
Many of our current Australian retirees paid taxes (higher than what we pay today) for up to 50 years (and some still pay tax), and those taxes helped build the infrastructure and community services that we all enjoy today. Hopefully, the efforts of each successive generation will add to the experience and lifestyle of the generations following.

Merely cutting retirement incentives is not robust, strategic long-term retirement policy. We want older Australians to have accumulated assets to support their retirement. Suggesting that because they have done what they were expected to do, they should then be punished with retrospective Age Pension and superannuation policies, and selective franking credits policy, is, in my opinion, lazy policy, advised by out-of-touch advisers and egged on by a group of Australians who believe that the younger generations are immediately entitled to a lifestyle that the older generations took 30 to 40 years to create.

If a retired Australian has superannuation savings or non-superannuation savings, and they rely mainly on those savings (super pension, interest, dividends, franking credits) to live, then they did what they were asked to do. Such Australians heeded the key message of successive governments. The key message was you need to save for your retirement rather than relying solely on the Age Pension.
---

 

[sptrawler]

The problem is Bill, no one gives a $hit, as you get older you become an easy target, the politicians care more about overseas issues than pensioners.
The young are just looking for what they can buy next and the middle aged are just hoping you move on as soon as possible.
With the latest changes, you will be just as well off on the pension Bill, so get out there and enjoy mate.
Give everyone the 'bird' and tick off your bucket list.
It is only a matter of time, before they limit how much you can withdraw from your super, because the penny will drop and people will start spending their nest egg.

I have been doing some sums, since yesterday, as this subject was on another thread.
The reality is if they take the franking credit off, and you have $1m in super, you are no better off than someone with $200-300k in super.
With $1m in super, you would probably have half in shares and half in cash, so at 4.2% overall return that is $42,000 income without franking credits.

On a pension asset test $387k and income test $7,900p.a, then lose 50c for every dollar above that.

So if a couple had $300k of shares, giving 4.2% dividend, that would be $12,600 + $3780 franking = $16,380
By the income test 16,380- 7900 = $8480/2 = $4240 off the pension.
So $36,301.20 - $4,240 + $16380 = $48,441.20 + cheap drugs on the pension.

This is only my working out, but if it is correct it certainly highlights that it is a waste of energy, saving to self fund.IMO If it is incorrect can someone correct me please.
You have to forego a lot of life's pleasures along the way, to build up a nest egg, only to have the politicians spit in your face.
The really galling thing, is the muppet's who cheer them on, not realising it will affect them in the not too distant future.
All we can hope, is the dumbar$es wake up, and realise how stupid Labors plan is.

 

[Junior]

I have been doing some sums, since yesterday, as this subject was on another thread.
The reality is if they take the franking credit off, and you have $1m in super, you are no better off than someone with $200-300k in super.
With $1m in super, you would probably have half in shares and half in cash, so at 4.2% overall return that is $42,000 income without franking credits.

I think you are much better off with $1mill, as you have access to an additional $700,000 to $800,000 in capital. This is very valuable....you could use this capital:

* to slowly draw down on to top up your income in retirement, and achieve a better standard of living.
* Gifts or loans to children & grandchildren.
* take a lump sum to fund major home repairs/renovations, an overseas holiday, a new car or caravan.
* fund a deposit to enter an Aged Care facility, and to fund daily fees.

An individual or couple on full Age Pension generally cannot afford any of the above luxuries.

 

[sptrawler]

I think you are much better off with $1mill, as you have access to an additional $700,000 to $800,000 in capital. This is very valuable....you could use this capital:

* to slowly draw down on to top up your income in retirement, and achieve a better standard of living.
* Gifts or loans to children & grandchildren.
* take a lump sum to fund major home repairs/renovations, an overseas holiday, a new car or caravan.
* fund a deposit to enter an Aged Care facility, and to fund daily fees.

An individual or couple on full Age Pension generally cannot afford any of the above luxuries.

I don't disagree with you, but I'm saying there is no point in keeping the million, you will be better off divesting as you say above, rather than keeping it and being penalised.
It is very difficult for a person, who is a saver and an accumulator, to change into a spender and consumer. But I think it would be very unwise not to do so, because things could change very quickly.

IMO it will only be a matter of time, before the Government brings in rules that wil restrict your options, blind Freddy can see that.
The pension and $300k is as good if not better outcome, than $1m and the loss of lifestyle to accumulate it, it is a no brainer.
Yet as has been shown on here, most have no sympathy for the SMSF pensioner, they are all thought of as fat cats and the pensioners as poor people that need more.
Don't forget the pension is indexed every six months, there are a lot of perks and you could top up the pension from $300k for a long time.
You can also have a lot of fun spending down to $300k, and the pension contribution keeps going up.
10 years ago I would never have said this, but watching the smirk on silly Billy's face tells me anything is possible, nasty things coming. IMO

 

[Humid]

Buying high yielding stocks by definition means buying mature companies with limited growth opportunities who can find nothing better to do with their money than return it to shareholders. In general, these stocks are by their nature, dull under-performing stocks. As such, in pursuit of franking credits, many investors have committed themselves to a lower total return because the share prices of mature stocks don’t grow as much as stocks that are in growth industries and don’t pay high dividends but reinvest returns. This franking “shock” might just shock some investors out of this rather mediocre game of buying low growth stocks with high yields which have for years distracted them from the growth available in the stock market generally. Ask any American and they will tell you that bonds are for income and equities are for growth. This is why so many American companies continue to pay no dividends despite sitting on mountains of cash because they know their job is to achieve a high return on equity and use their profits to fund that growth. American companies know the folly of chasing income, because it is in the US investment culture, to grow earnings not to return capital to shareholders so that they can earn 2.8% in bonds. It has always rather amazed me, the Australian appetite for income stocks, and it is because of franking, and the companies have pandered to that demand. That’s why the Australian market yields 4 ½% against the US market on just over 2%. Because we have a population of investors seduced by a tax fiddle rather than the main game of trying to make money out of capital gains.

 

[sptrawler]

Buying high yielding stocks by definition means buying mature companies with limited growth opportunities who can find nothing better to do with their money than return it to shareholders. In general, these stocks are by their nature, dull under-performing stocks. As such, in pursuit of franking credits, many investors have committed themselves to a lower total return because the share prices of mature stocks don’t grow as much as stocks that are in growth industries and don’t pay high dividends but reinvest returns. This franking “shock” might just shock some investors out of this rather mediocre game of buying low growth stocks with high yields which have for years distracted them from the growth available in the stock market generally. Ask any American and they will tell you that bonds are for income and equities are for growth. This is why so many American companies continue to pay no dividends despite sitting on mountains of cash because they know their job is to achieve a high return on equity and use their profits to fund that growth. American companies know the folly of chasing income, because it is in the US investment culture, to grow earnings not to return capital to shareholders so that they can earn 2.8% in bonds. It has always rather amazed me, the Australian appetite for income stocks, and it is because of franking, and the companies have pandered to that demand. That’s why the Australian market yields 4 ½% against the US market on just over 2%. Because we have a population of investors seduced by a tax fiddle rather than the main game of trying to make money out of capital gains.

Sounds like someone who hasn't done a lot of investing, the worker needs to buy an income that replaces the wages, when they stop working.
Most as I did, initially buy amazing growth potential stocks and after a period of time find they are no further ahead, some go up, some go down, some go broke.
Also they notice that there is very little, if any income coming in, to replace that pay packet.
Then it dawns on them, jeez I'm running out of time, I had better buy some income producing stocks.
Then after another period of time with dividend re investment, they think hell this is going o.k, I should add to them.
Now silly Billy and don't care Chris, are saying "well that was stupid, you would have been better off taking that cruise when you were younger" .

All that crap, Bowen says to justify his disgracefull behaviour is nonesense, buying Australian mature businesses and re investing the dividend is called compounding, buying new start ups with a blue sky prospectus is called gambling. He is just a dick.
Also the 1987 stock market crash, was caused because of lack of savings in Australia, the banks nearly went belly up and it was the reason behind Keating starting super in the first place. Bowen is a wally, with all the rubbish he says.

 

[Humid]

Written by a broker lol