With a bit of luck all super won't be available untill pension age and no pension is available untill all your super is exhausted.
That sounds fair for everyone.
How would that work? If no government pension is available until ALL your Super is exhausted, where is one's income in retirement going to come from when the Super balance is too low to generate a return that is enough to live on? Or are you actually suggesting people should be forced to use up all their capital before having any access to government pension, regardless of their age or circumstance?
The bigger issue to me is how assets can be packaged to collect the age pension. Because the principle residence is exempt from the assets test, at your preservation age you can draw money from super tax-free and structure your assets in a way that could allow you to live in a million dollar plus home in retirement and still collect either a full or part pension payment. Your nearest financial planner can tell you all about it and many specialize in this area. The whole issue of millionaire property owners collecting a government pension is a vexed one that the government will need to look at eventually. Super savings should provide a retirement income stream and not be used as vehicle to manipulate finances to collect the age pension.
+100.
http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Discussion-Paper
''...Australia has a three pillar approach to the provision of retirement incomes, comprising the means tested and publicly funded Age Pension, compulsory private savings through the Superannuation Guarantee arrangements, and voluntary private savings supported by taxation concessions.
The Age Pension remains the main support in retirement for those who are not able to save a sufficient amount during their working life. Superannuation was designed to reward and support all Australians to save for a comfortable, secure and financially adequate retirement....''
Um, you post a link to what appears to be a Treasury paper, including what I'd assumed was a quote from Treasury, although it sounded more like what a politician would say than the way Treasury articulates.
Sure enough, your quote is from a foreword to the discussion paper from none other than Mr Bill Shorten.
Given Mr Shorten doesn't believe we have any sort of structural problem and there is no need to address the fact that Australia has the highest spending growth projection in the world, I'm less than disposed to take his word for anything to do with Super or, for that matter, savings in general.
Single Pension = $842.80 per fortnight ($421.40 per week)
Couple = $1270.60 per fortnight - just 66% more ( $635.30 per week)
OK, your definition of a welfare payment that is a struggle is the above. I wonder how you'd define the Newstart payment of around $250 p.w.? Let's remember that most aged pensioners will at least own their own home and car. In contrast, a large number of people who lose their jobs - or can't find one - will be renting and have minimal savings. Good luck with finding rental accommodation in most areas where the jobs exist for $250 p.w., let alone provide yourself with food, transport etc etc.
That's a dilemma for governments. Already there are people who are disinclined to look for a job. The government is trying to address this with its harsh new measures. Perhaps it will work. I don't know.
Perhaps it's worth a try, or work for the dole, even just to get people to understand the ethic of a structured day and putting in the effort of making a contribution, as opposed to sitting at home playing with the studs in their noses.
All welfare obviously needs to be a safety net, not a long term viable way to live imo.
What percentage of a basic wage would it take to save for a self-funded retirement?
OK, let's take a very rough look at this:
Average wage $1500 p.w. ergo $78,000 p.a.
Let's round it down to just $70,000 and, even more ridiculously conservatively, suggest it doesn't rise during a working life of age 25 to 65, forty years.
Let's even assume it earns nothing and is not compounded, neither of which would actually happen.
At 15% compulsory super, again rounding down for simplicity, that would be $400,000.
So, obviously above is almost meaningless because it doesn't represent a real situation where the 15% p.a. amount would be earning a return, and compounding would have huge effect.
I'm not suggesting $400K would be enough for self funded retirement, but I'm guessing the resulting amount from a fully calculated invested, compounded amount might be. Obviously inflation would need to be taken into account also, as would the reality that no one is going to be staying on the same salary all their working lives.
So perhaps not as difficult as you might think.
The less income a person earns, the higher percentage goes in basic living essentials, and the less chance there is that there will be surplus to save,
Yes, agree. But all around us we see evidence of people on high incomes who haven't bothered to save, and others on much less who have set different priorities and have saved substantial amounts. Also, some folk who have sought financial literacy and learned how not to lose money. Seems to me it's often about attitude and goals than just dollar amounts.
Or I might be entirely misguided, and it's all about luck, nothing to do with effort.
Hopefully,some pressure will be alleviated by more people who just keep working?
According to the ABS, 25% of people between 60-69 are still working, and some super funds online are saying a lot more expect to work into their seventies. Perhaps there will also need to be a shift in the distribution of wealth?
Well, I don't know about you, but I certainly wouldn't want to be working until I was 70. And it's just not going to be feasible for a lot of people engaged in hard physical labour.
Before that happens, I'd like to see some of the excessively generous treatment of Super curtailed somewhat.
We have already discussed the unfairness of people living in exempt multi million dollar homes and receiving the full pension. Also surely there should be a limit to the wealth creation being engaged in quite legally by people who are very well off and continuing to receive tax concessions in Super with accounts of $10M and $20M. Just seems to me extremely unfair that tax is being applied to young people on the average wage, trying to get together enough for deposit on their first home, so that that tax can continue supporting the full age pension for some wealthy widow.
Wouldn't that depend on how much you have in super?
From my experience, the cost of running a SMSF is $2000 p/a +, and imo, small balance super would not support such a fee.
Accounting/audit costs vary enormously. Some of the big glossy firms will charge $6000 for what a good suburban accountant with SMSF experience will do for $1200.
Anyone who is accepting an arrangement where fees are charged on % of assets basis is being suckered imo, especially as the amount becomes higher.
The fee should be based on the number of hours of work required to complete the tax return. If there are few transactions, it's pretty hard to see any justification for $2000+.
I don't know what fees public super funds charge, even if you only had $200K to start with, a fee of, say, $1200, would only represent about 0.06%. Is that actually more than you'd pay an often poorly performing public fund?
Julia, everyone can go to the "university of finance", but that doesn't mean that they will qualify with a diploma...people are all different
Totally agree. And there will be people who simply don't have the capacity to go to your 'university of finance' in the first place. There will always be a safety net for them.
I'm not talking about people like that. I've always felt strongly that we need to recognise the differences in individual capacities, whether derived from genes, childhood modelling, or life circumstances.
I'm talking about the well educated, highly intelligent people who just don't think about the need to save, the folk who regard income not required for non-discretionary payments like insurances, rates, etc., as money for a holiday, new car etc.
OK, fine, we all have our own priorities. I'm just a bit sick of some of these people making remarks like
"we couldn't be expected to have enough in retirement because compulsory super only came in in the last years of our working lives". Well, duh! Perhaps just give a bit of thought to whether you want to be restricted to income from only what will inevitably be a dwindling age pension as the numbers seeking it more and more blow out in relation to those workers who are going to be paying for it.