Superannuation, the ultimate government cash cow?

stewiejp · 20 September 2013

I think the average Australian who is approaching retirement age, especially ones who have worked all their lives seem to think they are "entitled" to the OAP since they have put so much into our tax system over the years. That is demonstrated well by this thread.
I'm certainly no expert but isn't the definition of welfare this : "Financial or other aid provided, especially by the government, to people in need"

So by definition people who don't need it (ie earn over a certain amount, or have assets over a certain amount) don't get it.

People like Tech/a (nothing personal mate) who have done a fantastic job making this country what it is today, but claim they are entitled because they have paid taxes.... just makes me shake my head. As far as I know it's there for people who need it, not everyone. The main reason I got into investments, shares etc is to plan for when there is no pension, or at least no pension I am entitled to because hopefully I'll be a self funded retiree.

DocK · 20 September 2013

stewiejp said:
I think the average Australian who is approaching retirement age, especially ones who have worked all their lives seem to think they are "entitled" to the OAP since they have put so much into our tax system over the years. That is demonstrated well by this thread.
I'm certainly no expert but isn't the definition of welfare this : "Financial or other aid provided, especially by the government, to people in need"

So by definition people who don't need it (ie earn over a certain amount, or have assets over a certain amount) don't get it.

People like Tech/a (nothing personal mate) who have done a fantastic job making this country what it is today, but claim they are entitled because they have paid taxes.... just makes me shake my head. As far as I know it's there for people who need it, not everyone. The main reason I got into investments, shares etc is to plan for when there is no pension, or at least no pension I am entitled to because hopefully I'll be a self funded retiree.

Agree with the above, but I can also see why this is such an emotive subject for some. It all comes down to basic human nature imo. Most people would never begrudge a handout or welfare assistance to those that need it - such as Syd's example of his family years ago. If you are disabled in some way, lack the ability to earn above minimum wage, are raising a houseful of future taxpayers, or in any other way are doing your best but just can't put enough aside to provide for yourself - I don't think many would begrudge welfare support. That's what makes us a civilised society - the fortunate should consider themselves lucky to have been able to help the less so. It really irks most people though to see those who should have been able to provide for themselves receive some of their hard-earned taxes. It's basic human nature really - nobody want to see others get a free ride. Those that did without luxuries all their lives in order to save for their "golden years" begrudge the pension payments to those that spent every dollar they ever earned with no thought of tomorrow - and why wouldn't they?

How to differentiate between those that need help and those that should have been able to provide for themselves - that's the real question isn't it? Compulsory super contributions deducted from wages has gone some way towards forcing those in work to at least partially provide for their retirements - I know none of my employees would have voluntarily put any of their wages aside for retirement so the introduction of (and planned increases to) SGC was a massive step in the right direction for our country.

VSntchr · 20 September 2013

A good discussion with some very interesting points.

The difference of opinion even between just the small sub-section of the population that ASF represents really goes to show why government policies on topics such as this are so hard to get right and keep everyone happy.

I see the point that some are making where they say that because they have paid alot of tax and created wealth in the economy and for their workers that they are entitled to something back. BUT... the flip side of this is that they may have actually already recieved more than others via the platform that they have leveraged their success from - our economic prosperity, (relative) political stableness, (relatively) good infrastructure...etc

If the government becomes overly concerned with giving out pensions to higher earners who think they are entitled - at what cost is it to the above factors? and how will it effect the chances for future generations to do the same?

Not saying that these things aren't something that everyone has the opportunity to use to create wealth, but just something that crossed my mind..

sydboy007 · 20 September 2013

DocK said:
How to differentiate between those that need help and those that should have been able to provide for themselves - that's the real question isn't it? Compulsory super contributions deducted from wages has gone some way towards forcing those in work to at least partially provide for their retirements - I know none of my employees would have voluntarily put any of their wages aside for retirement so the introduction of (and planned increases to) SGC was a massive step in the right direction for our country.

Even if we can distinguish, I doubt we'd able able to let poor retirees starve.

I do think we need to be educated about the fact that life on the pension, on any welfare, is more existence than life because you generally can't afford the luxuries of life on welfare. That's why both my parents are still doing some work each day, so they can afford to do a cheap renovation of the kitchen and bathroom, or have a trip to driving around Tasmania.

A list of the top 20 sources of revenues and Govt spending programs would go a long way to letting the voters see where the money comes from and goes to. Might be a rude shock that super and the pension are near the top of the outgoings list.

sydboy007 · 20 September 2013

This might help people understand where the money is going in the budget

http://www.abc.net.au/news/2012-05-08/interactive-budget-2012-how-its-spent/3971410

Assistance to the Aged is already the number 1 budget spending and we've yet to really see the boomer generation hit retirement.

It's unclear if that accounts for the taxation breaks to super, but my understanding is the pension is already around the $40B a year mark and steadily rising.

qldfrog · 21 September 2013

indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
etc should be more publicised

tech/a · 21 September 2013

qldfrog said:
indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
etc should be more publicised

Private schools pay maintenance/wages/insurances/running costs/land/rates/most improvements.
Etc
Public schools pay for?

tech/a · 21 September 2013

Just a couple of comments on comments made now I have a little more time.

PAYE Tax.
Of course my employees "Pay the tax"
But my company has to profit enough to cover wages AND taxes AND work cover AND Super Payments.
Its my company check which goes to the tax department!
If it doesn't then I don't employ.If I employ MORE I cop bigger taxes (Payroll tax!)

I take ALL the RISK. If a larger Client goes through the hoop and owes me $100s of $1000s I cop the lot.
My employees walk away and find a new job. I lose the lot but whoopy Ill be able to claim welfare!

Im not denying those who find life harder--welfare--the genuine ones!
But I do get bent out of shape when I see guys applying for jobs who have no intention of being employed---who have it easy and BLUDGE off welfare.

I had 2 last week
Thongs
Chewies
Hadn't washed for a week
Couldn't string a sentence together and couldn't get out of the interview fast enough.
Sure I'm in the building industry and pussies don't last---but!!

To deny those who stick their neck out (for a better long term lifestyle and in turn create jobs and incentives
for others in the process) Cheap medical,pharmaceutical,pension discounts and even a small passive income (Pension) ---when they have been taxed the bejeezus out of all their lives---in my view stinks.

Sure this is the Lucky country.
I like many didn't finish Secondary school.

My first job was pumping gas!!
I had the same choices everyone else had.
So don't tell me how hard struggle street has it and they should EXPECT a safety net.

Unless your born incapacitated/fall to a disease or accident/Invalid Child or Parent--during your life time---you have exactly the same opportunities as EVERYONE. Where else is there --NEED???
Yeh there is one---the retired Grand parents left with a Child or children from kids who cant cope--killed
or suicided!-- self funded--who cares!

Contribute to society and make your own safety net.
Find and vote for politicians who understand that equality is for all not JUST THE POOR end of town.

----End of rant----

qldfrog · 21 September 2013

tech/a said:
Private schools pay maintenance/wages/insurances/running costs/land/rates/most improvements.
Etc
Public schools pay for?

I would assume the same: all depends on what is defined in the bucket;
anyway, the budget is clearly a welfare state one and I am not impressed...

qldfrog · 21 September 2013

pS tech/a I am in the top rate as well, and owe my own business, but I would have no issue not acessing access to any welfare/pension etc AS LONG AS it is restricted to the one in need.
The focus should be not on keeping global access to pensions etc but on retsricting drastically the total amount AND reduce taxes:
I will never trust government in being efficient in taxing me then paying me back part of the initial amount.
And yes, I believe taxes are a disincentive in this country
I absolutely refuse to pay more than half what I can earn in tax, and this is quickly reached when top rate + GST....so I favor more free time vs more money as I am not into tax dodging (legal or not) so that my average goes below 50%.
every one makes his own choice

sydboy007 · 21 September 2013

qldfrog said:
indeed an interesting set of figures: more money gioven to private than public school for example, an amazing amount already for the disablility funding
etc should be more publicised

I was amazed with the $34.2B in tax churn for families with Children.

I'd love if someone could calculate what rate a land tax in conjunction with a very small financial transaction tax (eg 0.001%) and broadly based GST at say 10% on the essentials and 20% on the rest would be required to remove most other taxes including income taxes. best to tax what you can't move or hide easily. Might put a lot of accountants out of business if the tax system was made a lot simpler.

Technically the states provide the majority of the funding for public schools, but yes I do find it strange that we've had over a decade of excess funding to private schools yet little outcry. Imagine if some "dole bludgers" were receiving 50% or 100%+ in extra entitlements and the Govt said it's OK no one should be worse off with the new rules?

I do wish it had been broken down a bit more into the specific programs that the total accounts for, but something easily understood like this should be mandatory for the Government to release with the budget.

McLovin · 1 October 2013

Although the writer is discussing America, I thought some of his points could equally apply to the current situation in Australia...

There are two ways to become richer. One is to provide more goods and services; that’s economic growth. The other is to snatch someone else’s wealth or income; that’s the spoils society. In a spoils society, economic success increasingly depends on who wins countless distributional contests: not who creates wealth but who controls it. But this can be contentious. Winners celebrate; losers fume.

Of course, the two systems have long co-existed – and always will. All modern societies chase growth; all redistribute income and wealth. Some shuffling is visible and popular. Until now, that’s been the case with America’s largest transfer, which is from workers to retirees through Social Security and Medicare. In 2012, this exceeded $US1 trillion. Still, for the nation, the relevant question is whether productive behaviour (generating economic growth) is losing ground to predatory behaviour (grabbing existing wealth and income). There are good reasons to think it is.

...

Larger distributional contests loom. Growing income inequality has intensified pressures to raise taxes on the rich and near-rich, however defined, to support the middle class and poor. The massive transfers from workers to retirees are starting to sow a backlash among the young, who wonder whether all the elderly’s benefits are justified.

Most Americans seem indifferent as to how they get ahead, whether by wealth creation or redistribution. The choice seems abstract. Fair enough. But for the country, the choice matters enormously. The appeal of the affluent society was that one group’s gains didn’t have to come at the expense of others’. The promise of economic growth was oversold, but it had the healthy effect of encouraging an expansive and inclusive vision of America.

What’s emerging today is more self-interested and self-destructive. The dilemma of a rich society is that its prospects can be undermined by its very abundance. Countries preoccupied by distributional wars are distracted from production. The ambitions of many of its most talented members can be satisfied not by adding to the total output but simply by subtracting from someone else’s. They are merely rearranging economic assets among themselves. If taken too far, this promises more political division and economic decline.

http://www.afr.com/p/opinion/affluent_society_subverted_by_its_SdoYoBv6R6SKk0NPBy0bUM

That last paragraph certainly rings true to me of Australia. So much of our political discourse is devoted to transfer payments, subsidies for under-performing industries and tax breaks. The focus seems to be on how we cut the pie, rather than how to expand the pie. At the last election the LNP's big campaign promise was a new transfer payment. Before that, the ALP had promised a new tax to create the NDIS. It certainly fits into the discussion on this thread.

sydboy007 · 1 October 2013

McLovin said:
Although the writer is discussing America, I thought some of his points could equally apply to the current situation in Australia...

http://www.afr.com/p/opinion/affluent_society_subverted_by_its_SdoYoBv6R6SKk0NPBy0bUM

That last paragraph certainly rings true to me of Australia. So much of our political discourse is devoted to transfer payments, subsidies for under-performing industries and tax breaks. The focus seems to be on how we cut the pie, rather than how to expand the pie. At the last election the LNP's big campaign promise was a new transfer payment. Before that, the ALP had promised a new tax to create the NDIS. It certainly fits into the discussion on this thread.

I think that sums up things in Australia quite nicely. Too many vested interests liking their cut of the cake with minimal effort.

With the poisoned politics and little to no bipartisan support for any changes to the way things are, I doubt we will see any changes of consequence till the ToT has turned against us and unemployment has a 7 or maybe 8 in front of it.

Seems as a society we only like to make the changes during a crisis, rather than making the much smaller and easily coped with changes over time.

doctorj · 1 October 2013

sydboy007 said:
This might help people understand where the money is going in the budget

http://www.abc.net.au/news/2012-05-08/interactive-budget-2012-how-its-spent/3971410

Assistance to the Aged is already the number 1 budget spending and we've yet to really see the boomer generation hit retirement.

It's unclear if that accounts for the taxation breaks to super, but my understanding is the pension is already around the $40B a year mark and steadily rising.

This is why I personally think people should be smart about how they manage their superannuation. I think you have to be aware of the fact that the superannuation system we enjoy today is only a product of legislation. There is a risk that the legislation that underpins superannuation may not always be there.

A number of countries have recently killed off their pillar 2 pension systems (superannuation). People’s contributions now go directly to the state and exist in unallocated accounts for payment of retirement benefits. They earn some sort of notional return, but typically not as good as the former privately run system. What this means is you will have reduced transparency over your savings, less control and less certainty over your ability to withdraw them at retirement.

With an ageing population the stress on the budget will only get worse. The government will have to find solutions. The fact is, the current pension system was designed when the ratio of tax payers to retirees was quite a lot different to what it is today. The ratio is only deteriorating, so the risk that the government may be tempted to capture the superannuation cashflows is for me, non-trivial.

FxTrader · 1 October 2013

McLovin said:
That last paragraph certainly rings true to me of Australia...

No doubt this little gem of an opinion piece was written by a republican devotee of trickle-down economic rationalism. The language of far right economic propaganda is infused throughout. In the good old USA, amoral corporate greed and political influence has devastated the middle class and created enormous wealth disparity and concentration in society. Wealth transfer is occurring, not from the middle class to the elderly, but from the 99% to the 1%.

I especially like this bit of biased insight...

Growing income inequality has intensified pressures to raise taxes on the rich and near-rich, however defined, to support the middle class and poor. The massive transfers from workers to retirees are starting to sow a backlash among the young, who wonder whether all the elderly’s benefits are justified.

So pressure is intensifying on the rich to support the dwindling middle class and poor through higher taxation (and so it should) but young workers backlash is properly directed at the elderly pensioners drawing social security!

The author is right about one thing but not for the reason he/she puts forward...

What’s emerging today is more self-interested and self-destructive.

That is the very essence of corporate America where greed and self-interest are virtues, to hell with others. Life is just a zero sum game after all.

At least in Australia there is an attempt, through the superannuation system, to address the issue of self-funded retirement through compulsion to save instead of spend. The idea that the poor and socially disadvantaged are somehow collectively trying to snatch wealth from the rich is a truly repulsive argument.

sydboy007 · 1 October 2013

doctorj said:
This is why I personally think people should be smart about how they manage their superannuation. I think you have to be aware of the fact that the superannuation system we enjoy today is only a product of legislation. There is a risk that the legislation that underpins superannuation may not always be there.

it was one of the reasons I started a SMSF. I also didn't like being in the equivalent of a managed fund which is what most retail and industry funds are. Getting access to my money for a pension or lump sum is at their discretion.

I just wish the super system wasn't so dam expensive. It costs a lot in the fees gouged by the finance system, and it costs a lot in higher taxation.

Bill M · 8 October 2013

We have the third best superannuation/pension system in the world according to this article. Not a bad effort for us as a country, better than UK, Germany and USA too.

---
Australian retirees have got it pretty good, according to a report ranking the lucky country as having the third-best pension system in the world.

Compulsory superannuation combined with a generous Age Pension helped Australia maintain third place in this year's Melbourne Mercer Global Pension Index.

Link to full story: http://www.thebull.com.au/articles/a/41200-aust-retirement-system-among-world's-best.html
---

sydboy007 · 8 October 2013

Bill M said:
We have the third best superannuation/pension system in the world according to this article. Not a bad effort for us as a country, better than UK, Germany and USA too.

---
Australian retirees have got it pretty good, according to a report ranking the lucky country as having the third-best pension system in the world.

Compulsory superannuation combined with a generous Age Pension helped Australia maintain third place in this year's Melbourne Mercer Global Pension Index.

Link to full story: http://www.thebull.com.au/articles/a/41200-aust-retirement-system-among-world's-best.html
---

I question how long the generous aged pension is affordable. We're looking at a doubling of the over 65 population by about 2030, which aint a long time away. We might not have a budget surplus till 2020 the way things are going.

Considering the aged pension is already around the $38B mark, a doubling of the aged pension combined with over 1 less worker per dependent how the eroded tax base supports all the services we need I don't know.

13ugs13unny · 8 October 2013

sydboy007 said:
I question how long the generous aged pension is affordable. We're looking at a doubling of the over 65 population by about 2030, which aint a long time away. We might not have a budget surplus till 2020 the way things are going.

Considering the aged pension is already around the $38B mark, a doubling of the aged pension combined with over 1 less worker per dependent how the eroded tax base supports all the services we need I don't know.

Its relative, pensioners are a massive contributors to the economy. Even if the pension bill doubles on a linear scale over time, the economy will also benefit.

Pensioners tend to spend the lot to make ends meet for groceries, taxis, transport, utilities, aged care supplies, pharmaceuticals etc etc, they are an important part of the economy, those that own their homes outright and decide to downsize into a unit contribute to a transaction where stamp duties paid by the purchaser swell state government coffers, where the debt created is carried by a person who can service the debt given tight lending conditions.

It all part of the economy mix and I don't believe pensioners should be underestimated. I think a small deficit on occasion is a healthy thing to keep the economy cogs greased as long as the overall outlook is to balance the books and build a surplus for a rainy day.

sydboy007 · 8 October 2013

http://www.macrobusiness.com.au/2013/10/making-superannuation-sustainable/

pretty good read on super

Superannuation, the ultimate government cash cow?

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