Superannuation, the ultimate government cash cow?

[jet328]

The current pension system is way too generous as is, and discourages people from saving themselves.

Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.

In how many countries can you own a $US2 million dollar house, have $US0.5-1 million in other assests, yet still receive a part pension plus a healthcare card? Not to mention that a cleaner on $600 a week is expected to pay tax to fund this persons pension/healthcare.

Take someone on an average wage of 50k/year and calculate how much tax they pay. Even the healthiest are using some government services eg. might send kids school. You take out just a few little services and they are paying jack all in actual net tax. Yet this entitles them to years of pensions, costly healthcare, concessions? Its just completely unrealistic.

What about "they've paid taxes all their life" line? Firstly the average worker doesn't pay a great deal of net taxes. Secondly when the current pensioners were "paying taxes"
-were they funding people for 20,30,40 years of retirement?
-were they funding this many operations, devices, aids, scans, nursing homes, hospitals, doctors visits, medications, pathology tests, medical specialists?

Its just a completely unrealistic expectation to put in a bit, but then expect all this.

Sure you can do it now without a problem because the percentage of elderly people is so small, but once the boomers reach this age, there is no chance it goes on.

Hopefully we'll learn from what's about to happen in Europe/Japan/US.

Pensions should be reserved for those that have used up their own savings and then reversed mortgaged their house to centrelink.

What does anyone need a house for when they've both passed on?

 

[breaker]

There are plenty of decent Australians, who have paid their share of taxes, struggling to survive on the dole which is pathetically inadequate.
Companies, fail, downsize, all the time. If you're retrenched, especially if you're over 40, it's difficult for people to get another job. Doesn't make those people bludgers.

I meant the 18-19 year olds I see laying about all smoking

 

[StumpyPhantom]

The current pension system is way too generous as is, and discourages people from saving themselves.

Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.

I agree with your view jet328, as someone who is aiming not to rely on government handouts whatsoever.

There must be every encouragement for people to save, even if it means their house will be means tested before the get the pension.

Now you have to try and persuade Banco over to your view (I've given up) and argue that the incentives to saving for super now shouldn't be removed.

 

[craft]

The current pension system is way too generous as is, and discourages people from saving themselves.

Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.

In how many countries can you own a $US2 million dollar house, have $US0.5-1 million in other assests, yet still receive a part pension plus a healthcare card? Not to mention that a cleaner on $600 a week is expected to pay tax to fund this persons pension/healthcare.

Take someone on an average wage of 50k/year and calculate how much tax they pay. Even the healthiest are using some government services eg. might send kids school. You take out just a few little services and they are paying jack all in actual net tax. Yet this entitles them to years of pensions, costly healthcare, concessions? Its just completely unrealistic.

What about "they've paid taxes all their life" line? Firstly the average worker doesn't pay a great deal of net taxes. Secondly when the current pensioners were "paying taxes"
-were they funding people for 20,30,40 years of retirement?
-were they funding this many operations, devices, aids, scans, nursing homes, hospitals, doctors visits, medications, pathology tests, medical specialists?

Its just a completely unrealistic expectation to put in a bit, but then expect all this.

Sure you can do it now without a problem because the percentage of elderly people is so small, but once the boomers reach this age, there is no chance it goes on.

Hopefully we'll learn from what's about to happen in Europe/Japan/US.

Pensions should be reserved for those that have used up their own savings and then reversed mortgaged their house to centrelink.

What does anyone need a house for when they've both passed on?

Jett Some good big picture thoughts there.

I ask myself

Do you want the country you live in to have a transfer system to address wealth inequality?

If so what should be the size of that transfer?

Wealth inequality occurs both due to effort and economic rent. (ie proximity towards factors that are not your causation - Somebody buying a house in the 50-70 has received economic rent because of demographics , our miners receive economic rent because of our proximity to markets and quality of natural reserves etc etc)

Personally I do want to live in a country that has a wealth transfer system.

I would prefer to see that transfer system based on taxing gains from economic rents to subsidise those that are on the wrong end of economic conditions.

I don’t like to see effort taxed to subside those that make no effort.

I think we have a long way to go and the level of education and debate offers no hope of making quick progress. We seem to be bogged down by non-visionary politics for as far as the eye can see.

Taxation of the super system shouldn't be left out of the mix because in some cases it is sheltering some large amounts of economic rent derived wealth and as for housing and pension eligibility rules.....

 

[Knobby22]

Well put, craft.

 

[Julia]

The current pension system is way too generous as is, and discourages people from saving themselves.

Its amazing to think that someone can collect a pension for 30 years plus healthcare from the taxpayer, pass on and then handover a $1 million house as inheritance without the taxpayer seeing a cent.

In how many countries can you own a $US2 million dollar house, have $US0.5-1 million in other assests, yet still receive a part pension plus a healthcare card? Not to mention that a cleaner on $600 a week is expected to pay tax to fund this persons pension/healthcare.

Take someone on an average wage of 50k/year and calculate how much tax they pay. Even the healthiest are using some government services eg. might send kids school. You take out just a few little services and they are paying jack all in actual net tax. Yet this entitles them to years of pensions, costly healthcare, concessions? Its just completely unrealistic.

What about "they've paid taxes all their life" line? Firstly the average worker doesn't pay a great deal of net taxes. Secondly when the current pensioners were "paying taxes"
-were they funding people for 20,30,40 years of retirement?
-were they funding this many operations, devices, aids, scans, nursing homes, hospitals, doctors visits, medications, pathology tests, medical specialists?

Its just a completely unrealistic expectation to put in a bit, but then expect all this.

Sure you can do it now without a problem because the percentage of elderly people is so small, but once the boomers reach this age, there is no chance it goes on.

Hopefully we'll learn from what's about to happen in Europe/Japan/US.

Pensions should be reserved for those that have used up their own savings and then reversed mortgaged their house to centrelink.

What does anyone need a house for when they've both passed on?

Really good points.

Well put, craft.

+1.
Especially this:

I don’t like to see effort taxed to subside those that make no effort.

 

[banco]

Now you have to try and persuade Banco over to your view (I've given up) and argue that the incentives to saving for super now shouldn't be removed.

You've set up a straw man. I never said that all incentives should be removed I said I don't see much of problem with the incentives that tend to be mostly used by high income earners being made slightly less generous. Let's not forget the incentives are for extra payments into super people are obliged to pay in their 9% regardless.

 

[jet328]

Personally I do want to live in a country that has a wealth transfer system.

Completely agree, every time I go to US, I think 'they call this a developed country'. There are plenty of people who through absolutely no fault of their own have no chance in the dog eat dog world we live in with out assistance. In a civilised society the more fortunate should help the less fortunate.

Everyone will draw the line somewhere different, but I believe in a wealthy country like Australia everyone should have accommodation, food & basic necessities, moderate healthcare and education.

The problem is, election after election, politician after politician, more and more has been promised without considering the long run implications. The problem with promises is that they are much harder to take back. Just look at the first home buyers bonus to tie us over the introduction of the GST. 12 years later...

Not to mention that virtually no politician wants to be the one to address the ageing population issue. They all like to pretend they've done something or other to solve the issue, but its really just been skirting around the issue. If I put myself in a politicians shoes, I'd probably do the same. Choice between 'getting head chopped off' and 'leaving to the next guy' isn't a difficult one. Just look at what happened in France when they changed the retirement age from 60 to 62 a year ago. Can't see any French politician having another go at that one...

Back on topic and drawing the line. Have we gone too far when families on six figures are the less fortunate? Is there something wrong when retirees with significant assets outside their home deal with centrelink?

I say its too far, but I'm sure the people receiving don't nor the politicians.

I don’t like to see effort taxed to subside those that make no effort.

Agree, how crazy is it that Person A can work their butt off all year doing something productive for the country in their job. Person B can flip some existing property or shares, doing nothing productive. Please spare us the price discovery or providing cheap rentals for the needy flipping existing properties arguments. Aliens would think we were nuts if Person B paid half the tax of Person A.

I think we have a long way to go and the level of education and debate offers no hope of making quick progress. We seem to be bogged down by non-visionary politics for as far as the eye can see.

Lately I've seen quite a few political commentators mention that if Obama wins the next election, it will give him the platform to make some real changes as he doesn't have to worry about getting re-elected in his second term. It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
Maybe a single 8 year term would work better?
Maybe we need some sort of system like the RBA for decisions on a long term time frame?

Lots of people would say my view is heartless, but I think its pretending that the current system is sustainable is heartless. Just look overseas, I'm sure most would prefer something less that's sustainable, than what will finally result eg. greek pensioners

 

[Julia]

It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
Maybe a single 8 year term would work better?

The idea of the present government there for EIGHT YEARS is totally intolerable, so no. If they're doing a reasonable job they will be re-elected for the next three years, and even thereafter if the electorate is satisfied.

Lots of people would say my view is heartless, but I think its pretending that the current system is sustainable is heartless. Just look overseas, I'm sure most would prefer something less that's sustainable, than what will finally result eg. greek pensioners

I don't think your view is heartless. It's realistic and well expressed.

 

[Starcraftmazter]

Lately I've seen quite a few political commentators mention that if Obama wins the next election, it will give him the platform to make some real changes as he doesn't have to worry about getting re-elected in his second term.

That's a load of crap for many reasons. First of all, he had a very big platform for change when he was first elected, AND democrats had majority of both houses.

If he does uncontroversial things in his second term, the in the mid-term elections democrats will lose majority of either or both houses - just as last time.

My point is, the only time a president gets to do anything these days is when his party holds both houses. Now the only thing Obama did during his time in the spotlight is give ridiculous amounts of money to banks and waste more taxpayer dollars on unaffordable healthcare which is now even more unaffordable.

The point is, Obama is a sham. The democrats promised change, and instead Obama has signed a law stating that any US citizen, on US soil can be treated as a terrorist without any judicial oversight. And that's just the beginning.

It makes you wonder, does our current political system hinder difficult/unpopular decisions. Can you really implement a bit of 'vision' in under 3 years?
Maybe a single 8 year term would work better?
Maybe we need some sort of system like the RBA for decisions on a long term time frame?

Welcome to politics....

8 year terms would be horrific. In reality there is no sweet spot and no solution to the problem you allude to. This is why federal government always fails at doing anything productive, and wastes massive amounts of taxpayer dollars.

This is why we must have a very very small federal government, and local governments which governed according to the will of their people. It is far easier to connect with and hold accountable your local government.

If they're doing a reasonable job they will be re-elected for the next three years, and even thereafter if the electorate is satisfied.

Not if the electorate is el stupido. Prime example, years back the labour laws which have made Germany into the best economy in Europe were deeply unpopular and the government which enacted them was voted out. I choose this because this is an extreme of a federal government doing something very very good for the long term, and the electorate not being able to understand that.

Now if such an extreme case can happen in one of the smartest countries in the world, then countries like Australia, the US and UK have no hope in hell.

 

[drsmith]

If governments want to reform super, then perhaps the obvious starting point is how that money can be used in retirement.

http://www.smh.com.au/money/super-a...on-super-lump-sum-payouts-20121003-26zif.html

 

[sptrawler]

If governments want to reform super, then perhaps the obvious starting point is how that money can be used in retirement.

http://www.smh.com.au/money/super-a...on-super-lump-sum-payouts-20121003-26zif.html

I love Ken Henry's comment.

The former treasury secretary Ken Henry said in the 2010 Australia's Future Tax System Review that the current tax system made annuity products unattractive to many retirees and raised the possibility of the government providing annuities

Read more: http://www.smh.com.au/money/super-a...sum-payouts-20121003-26zif.html#ixzz28OQUBog8

So lets get that right if what I heard was right. Our pension system was originally funded by the tax payers same as the British and New Zealand system. Then the government in the 1950's or so said, no we will streamline it and incorporate the pension into consolidated revenue and pay it from there.
Then came the means test and people were told, you don't need it youv got money, so fund your own.
Now he is suggesting the government take that off you and pay you a pension. What a classic.

 

[Julia]

I don't think it would be unreasonable to limit how much can be taken in a lump sum. People taking it all and spending it, then accessing the full age pension seems to be quite contrary to the whole philosophy of the compulsory super which was surely to provide a living in retirement.

 

[sptrawler]

I don't think it would be unreasonable to limit how much can be taken in a lump sum. People taking it all and spending it, then accessing the full age pension seems to be quite contrary to the whole philosophy of the compulsory super which was surely to provide a living in retirement.

Isn't there allready rules in place whereby if you have got rid of money in the 5 years prior to applying for a pension. You don't qualify for the pension, I think the family home is excluded. But if someone is changing houses to spend money to qualify for the pension,I think they would have screw lose.

My guess is, all this screaming and shouting by the super funds, is a smoke screen because some could be insolvent. That's just my guess, at the moment more people are putting money in the bucket than are taking out.
However that is changing rapidly, that would be why people are starting their own super funds, at least they know they have the money.

 

[prawn_86]

Just another reason why young people shouldn't be contributing to Super:

http://www.theaustralian.com.au/nat...ee-super-payouts/story-fn59nsif-1226566283613

THE federal government is understood to be looking at reintroducing a limit on tax-free superannuation payouts, imposing an exit tax on funds carrying balances close to $1 million

1m is not much in todays standards, especially if one plans to retire for 20+ years....

 

[McLovin]

Bam!

This is inevitable IMHO. I was with my accountant the other day and we were chatting about super, even he said that the current rules are far too generous.

Here's what I said last week...Didn't expect the change to already be being discussed by the government.

The problem is that tax policy is not set in stone it adjust to maintain the revenue base. Go back thirty years and there was no FBT, GST, CGT and lots of companies getting lost at the bottom of the Harbour. With super I am making a deal with the government that I agree to put my money into a regulated account and in return receive a concessionary tax rate. This scenario works well while the majority are in accumulation phase and still paying income tax, but what happens when all those baby boomers hit retirement and go into pension phase super or the government pension? Someone still needs to pay the bills and it would not surprise me in the least when/if the government announced that SMSF's with assets over $x will have their income taxed at ordinary rates. It also wouldn't surprise me if they put drawdown restrictions in place.

 

[Garpal Gumnut]

As I said on this thread or another.

Take as much money out of your super as you can between now and May 2013.

Because Wayne Swan will tax it mightily if you take it out after that date.

I plan to be on the pension some day.

Why shouldn't I get all the benefits that pensioners do?

gg

 

[CanOz]

Well done McLovin...Called that one spot on.

In Argentina I believe the Prime Minister confiscated the national pension scheme, the whole thing...

Maybe Julia will eventually do the same

 

[tinhat]

It also wouldn't surprise me if they put drawdown restrictions in place.

That's the irony. At the moment there are minimum draw down rules that you have to pull so much out of the fund every year. After all it is suppose to be an income stream not a place to hoard money tax free once you have retired.

It use to be the case (back when Keating use to fiddle with the rules every bloody year) that when the rules changed everyone would be grandfathered; ie, the new rules would apply to contributions made after the rule change.

Everyone acknowledges they have to do something to stem the erosion of the tax base due to super concessions. They shouldn't tax on the way in. Whatever is under the concessionary limit should not be taxed on the way in. The government is only diminishing the future income streams of both the individual and the government itself (via the income on the super) by doing so. Zero in, 15% while accumulating and 15% on the way out at the other end would generate a lot more tax in the long run. But sacrifices tax revenue now to generate a much larger tax stream in the future and, while that makes sense economically (and fits the demographic dilemma) it probably doesn't fit into the political needs of the government.

 

[sptrawler]

Bam!

This is inevitable IMHO. I was with my accountant the other day and we were chatting about super, even he said that the current rules are far too generous.

Here's what I said last week...Didn't expect the change to already be being discussed by the government.

Prior to 2007 there was min and max withdrawls, this was known as an allocated pension. Post 2007 with the introduction of market linked pensions, maximum withdrawls were removed and it was made more difficult to put before tax money into super.
It will be difficult for the government to restrict peoples access to their after tax contributions. They may restrict access to concessionaly treated contributions.
If they go down that track, why would people put money into super, currently a married couple can recieve $36k before paying income tax.
I can see they may remove the tax free pension after 60 and replace that with a standard 19% offset.
This would bring it more in line with standard income tax brackets.