Superannuation, the ultimate government cash cow?

[banco]

Well here is an ATO list of SMSF balances, by value, just so people can be accurate when making statements.


Asset ranges 2013
$0–$50,000 = 6.7%

>$50,000–$100,000 = 5.1%

>$100,000–$150,000 = 5.4%

>$150,000–$200,000 = 5.1%

>$200,000–$500,000 = 24.7%

>$500,000–$1m = 23.4%

>$1m–$2m = 17.6%

>$2m–$5m = 9.9%

>$5m–$10m = 1.8%

>$10m = 0.4%

Total
100%

Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.

 

[sptrawler]

Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.

Actually if they started at $200k and worked up, it would catch a lot more.

 

[Julia]

Actually if they started at $200k and worked up, it would catch a lot more.

Are you seriously suggesting that should happen????

 

[lesm]

Actually if they started at $200k and worked up, it would catch a lot more.

Seems like the Government in these dire fiscal times should look at creaming off some cash from those with 1 million or above.

You have to be joking.

The Government of the day introduced a mandatory system for contributions to Superannuation funds, without any basic protection of contributor funds in place. Did a good job of creating another revenue/profit earning mechanism for the Financial Sector though. The fund managers can invest or lose contributors money without any real penalties or consequences applying. A bit like 'all care and no responsibility'. Oh shoot we lost 30/40/50 % of contributors funds, oh well another day another dollar.

Any suggestion related to creaming money from contributors funds makes a mockery of why compulsory superannuation was originally introduced.

 

[banco]

You have to be joking.

The Government of the day introduced a mandatory system for contributions to Superannuation funds, without any basic protection of contributor funds in place. Did a good job of creating another revenue/profit earning mechanism for the Financial Sector though. The fund managers can invest or lose contributors money without any real penalties or consequences applying. A bit like 'all care and no responsibility'. Oh shoot we lost 30/40/50 % of contributors funds, oh well another day another dollar.

Any suggestion related to creaming money from contributors funds makes a mockery of why compulsory superannuation was originally introduced.

The reality is we are going to have very big bills to pay going forward for the baby boomers' pensions and healthcare. The better off baby boomers are going to have to help pay for the not so well off baby boomers.

 

[lesm]

The reality is we are going to have very big bills to pay going forward for the baby boomers' pensions and healthcare. The better off baby boomers are going to have to help pay for the not so well off baby boomers.

The mandatory superannuation system was actually introduced to address what you refer to as the reality.

It was known at least in the early seventies that Government would not be in a position to fully fund pensions once baby boomers started to retire.

Over time baby boomers who thought that they were well enough funded to support or be in a position to support themselves in retirement. A number of those were caught later in life, so at best they may only have been in a position to partly fund their retirement and then be funded via the pension. As in any age group or generation there are those that will be in a better position to fund their retirement than others. Some will be quite happy to live on the pension.

Therefore, why should those who have planned for a self funded retirement be penalised, due to the poor planning of those who did not?

Additionally, without appropriate protections in place super funds are vulnerable to market forces and the management of fund managers, whereas SMSFs are under the control of the individual who is managing their own fund.

The ability of different mangers or individuals will have an impact on how well contributor funds grow.

So, you are saying those who have been astute enough to plan and fund their retirement, so as not to be reliant or a burden upon the pension system have to subsidise the Government yet again. Be mindful that some of those individuals have been subsidising systems, such as the Australian Social Welfare System for years, due to the amount of tax they pay.

This is really circular situation. We (the Government) will not be able to fund you when you reach pensionable age as we won't have enough money and we will introduce new legislation mandating superannuation contributions.

Now that quite a number of you are in a position to self fund your retirement, without being a burden on the Social Welfare System we are going to double whammy you again and take a % of you super savings and profits to fund the pension, as we still can't afford to support the baby boomers reaching pensionable age who cannot self fund their retirement.

Maybe the Government and its advisors need to go back to the School of Financial Management. Would be interesting to know what modelling they did when the original numbers were calculated related baby boomers and the amount need to support them and/or if they considered potential loss scenarios, which decimated some peoples retirement funds, especially those whom had already retired and were not in a position to return to the work force or could effect a meaningful financial recovery in the time frame they were looking at.

 

[Julia]

lesm, exactly right.

The only change I'd make to what you've said is from this

as we still can't afford to support the baby boomers reaching pensionable age who cannot self fund their retirement.

to this

as we still can't afford to support the baby boomers reaching pensionable age who have chosen not to self fund their retirement.

Plenty of us who are self funded have put money into savings and investments at the expense of a more affluent and luxurious lifestyle all through our working lives in order to be secure in retirement.

 

[lesm]

lesm, exactly right.

The only change I'd make to what you've said is from this

to this

Plenty of us who are self funded have put money into savings and investments at the expense of a more affluent and luxurious lifestyle all through our working lives in order to be secure in retirement.

Thanks Julia, reads much better with your change.

 

[sptrawler]

Are you seriously suggesting that should happen????

No, just pointing out to banco, that arbitary numbers could start anywhere, not necassarily where you want it to.

 

[McLovin]

The mandatory superannuation system was actually introduced to address what you refer to as the reality.

It was known at least in the early seventies that Government would not be in a position to fully fund pensions once baby boomers started to retire.

Over time baby boomers who thought that they were well enough funded to support or be in a position to support themselves in retirement. A number of those were caught later in life, so at best they may only have been in a position to partly fund their retirement and then be funded via the pension. As in any age group or generation there are those that will be in a better position to fund their retirement than others. Some will be quite happy to live on the pension.

Therefore, why should those who have planned for a self funded retirement be penalised, due to the poor planning of those who did not?

Additionally, without appropriate protections in place super funds are vulnerable to market forces and the management of fund managers, whereas SMSFs are under the control of the individual who is managing their own fund.

The ability of different mangers or individuals will have an impact on how well contributor funds grow.

So, you are saying those who have been astute enough to plan and fund their retirement, so as not to be reliant or a burden upon the pension system have to subsidise the Government yet again. Be mindful that some of those individuals have been subsidising systems, such as the Australian Social Welfare System for years, due to the amount of tax they pay.

This is really circular situation. We (the Government) will not be able to fund you when you reach pensionable age as we won't have enough money and we will introduce new legislation mandating superannuation contributions.

Now that quite a number of you are in a position to self fund your retirement, without being a burden on the Social Welfare System we are going to double whammy you again and take a % of you super savings and profits to fund the pension, as we still can't afford to support the baby boomers reaching pensionable age who cannot self fund their retirement.

Maybe the Government and its advisors need to go back to the School of Financial Management. Would be interesting to know what modelling they did when the original numbers were calculated related baby boomers and the amount need to support them and/or if they considered potential loss scenarios, which decimated some peoples retirement funds, especially those whom had already retired and were not in a position to return to the work force or could effect a meaningful financial recovery in the time frame they were looking at.

By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?

 

[lesm]

By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?

Would you mind pointing out where that is stated or implied?

The original post that was being referred to was related to creaming money out of superannuation accounts above a certain amount to subsidise funding pensions for baby boomers.

 

[McLovin]

Would you mind pointing out where that is stated or implied?

Sure. Right here.

So, you are saying those who have been astute enough to plan and fund their retirement, so as not to be reliant or a burden upon the pension system have to subsidise the Government yet again.

--

The original post that was being referred to was related to creaming money out of superannuation accounts above a certain amount to subsidise funding pensions for baby boomers.

How's the equality of a system with a reduced tax rate on contributions, a reduced tax rate on earnings while in accumulation and then a zero tax rate, regardless of account balance, on entering pension phase? Who's going to pay for your healthcare?

 

[banco]

lesm, exactly right.

The only change I'd make to what you've said is from this



to this



Plenty of us who are self funded have put money into savings and investments at the expense of a more affluent and luxurious lifestyle all through our working lives in order to be secure in retirement.

There's no good solution to the moral hazard problem.

 

[lesm]

By this logic, the only people who should pay taxes are those who rely on the public purse. Why should I subsidise all the public services that you consume?

Sure. Right here.



--



How's the equality of a system with a reduced tax rate on contributions, a reduced tax rate on earnings while in accumulation and then a zero tax rate, regardless of account balance, on entering pension phase? Who's going to pay for your healthcare?

You overlooked quoting the entire paragraph. It says nothing about people not paying taxes.

Selective reading and quoting is an old game

Back on your equality band wagon. One day Nirvana or paradise may exist where everything is equal, but doubt it will occur in our lifetimes, if ever.

So, giving something back to those of have contributed via the tax system for their entire working lives is something that you have an issue with?

Should be a good weekend for fishing, guessed you would bite :

 

[McLovin]

You overlooked quoting the entire paragraph. It says nothing about people not paying taxes.

Selective reading and quoting is an old game

Back on your equality band wagon. One day Nirvana or paradise may exist where everything is equal, but doubt it will occur in our lifetimes, if ever.

So, giving something back to those of have contributed via the tax system for their entire working lives is something that you have an issue with?

Should be a good weekend for fishing, guessed you would bite :

So then what are you saying? Super should be taxed or it shouldn't?

ETA: I assumed that when banco said cream off he meant tax. Maybe he just meant take in which case I misunderstood.

 

[lesm]

So then what are you saying? Super should be taxed or it shouldn't?

ETA: I assumed that when banco said cream off he meant tax. Maybe he just meant take.

My understanding was that it was with respect to targeting super fund contributions above a certain amount. It really wasn't that clear if this was just from a tax angle or not.

The dilemma we all face is that we don't know when the superannuation rules (legislation) will change or what impact it will have on superannuation funds held by individuals.

My personal angst in terms of super, is that the Government introduced legislation that mandated superannuation contributions, but did nothing to put anything in place to protect those funds to a reasonable degree.

It borders on a form of negligence, when you realise how much money has been lost by superannuation funds over the years, yet they still get paid. Certainly looked after the interests of the finance and investment sector.

Everyone (taxpayers) are going to bear the brunt of it one way or another, not only baby boomers, but especially the generations following on behind.

Our healthcare system is not cheap by world standards. It was rated in the top 4/5 most expensive healthcare systems in the world a number of years ago. Haven't seen any recent numbers. All the relevant support services will also need to be funded from somewhere.

Bandaid fixes by Governments are not going to fly long term, neither is robbing Peter to pay Paul with some of the superannuation changes that have been made over the last couple years to increase revenue will have a longer term impact. You need Governments that think in true strategic terms rather than election cycles.

If the y increase tax on super contributions/earnings then they are going to need to find the appropriate balance, otherwise it would be expected that there will be a backlash.

Who knows what the answer is, but it could make super start looking like a dud from an investment and retirement planning perspective, especially if they get it wrong.

If people start to become penalised via the tax system or other means for making astute investment decisions to self fund their retirement then where does that leave them. Might as well go on the dole and collect the pension at pensionable age or suffer being punished for saving or making profitable investments.

 

[sydboy007]

Obviously the problem is there's no other way to save for retirement than within super.

It seems unfair to be so critical of the boomers who didn't bother to save for retirement till compulsory super was available to all.

People who find the above silly argue against limiting the amount that can be accumulated in super, as if people would suddenly stop saving for their retirement. Pretty much anyone who was bumping up against some form of RBL would continue to save outside super, and just stop receiving massive amounts of public support.

How about we limit the amount in super to the pension assets test? What is the benefit to the budget and remaining tax payers to allow millions in assets to be saved away tax free in super?

If the figures from the ATO are reasonably correct then we currently already have around 30% of super balances at a point where the balances would preclude the members from gaining access to the pension. Those same members are receiving the greatest level of public assistance to increase their balances, even though there's no corresponding benefit to future pension cost reductions. How is that sensible economic policy? 5% yield on a $1M portfolio is $50K. If the person is still in the workforce their yearly super tax break could easily be more than the cost of the pension. How is that equitable, let alone economicaly sensible?

I find it quite unfair that last year I received roughly $5000 in super tax breaks. As a high income earner, well on the way to a comfortable retirement, why do I get so much Govt. largesse when there's over 2M Australians who get penalised by the super tax system? It doesn't make sense to me.

 

[sydboy007]

if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.

 

[sptrawler]

if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.

It will be interesting to see what, if anything comes of the 'white paper'.

Hopefully more comes of it, than came of the Henry report. As we say time will tell.

They didn't seem to have any problem, getting the 30% pay rises, through parliament.lol

 

[Junior]

if anyone can give me an economic rational as to why the below is equitable and good for the budget I'm all ears.

Those in the lower income deciles can't receive much in the way of tax concessions, as they don't actually pay much tax.