Superannuation, the ultimate government cash cow?

[Junior]

$40k (no extra contributions) compounded at 20%p.a over 20 yrs will get there. Most 30 year old would have well above $40k especially by the time they reach 40.

Its the rate of return that is the issue for most, but with a bit of interest, passion, dedication one can learn how to outperform the market.

Very savvy investors might have been able to achieve these numbers over the past 9.5 years (i.e. capturing the bounce following GFC lows in early 2009), but I don't think you should expect 20% pa over the long term, taking into account complete market cycles.

 

[Belli]

And it can be even more difficult than that Junior.

I know of three cases where employers of very small companies had not been making SG payments for a number of quarters despite promising to do so. Finally the employees made a complaint to the ATO which commenced proceedings with the employers to recover the amounts owed via installments. Some moneys were paid.

Subsequently the companies when into liquidation. ATO wrote to those employees advising as a result their cases had been closed and no further action would be taken by the ATO, i.e. take a ticket and stand in line. To rub salt into the wound in one case, as the amount recovered was not the full amount which should have been paid for a quarter, it's stuck in the ATO and not paid to the person's super fund.

Really great (?) aspect, is for some their long-service entitlement and annual leave (on which SG was payable) disappeared down the tubes as well and now they have to attempt to claw back some dosh and jump through hoops through the Fair Entitlements Guarantee - which doesn't cover or deal with the SG aspect.

Bizzare. One arm of Gov deals with the SG but not when liquidation occurs and another deals with LSL and leave but not SG aspects.

To say these people are unhappy is an understatement. Not even $40 for them!

 

[HelloU]

which makes me wonder why we do all those things on an 'extended future' basis (not sure we need all those things anymore but whatevs).
in the age of internet way simpler to me to have all money paid during a, say, fortnightly/monthly pay cycle. Once the fortnight has concluded then all liabilities have concluded - cos the money has been paid (so super paid, wages paid, lsl and whatevs paid). Next fortnight same process again.
Sure, that will need some tweaking but avoids the whole company going bust in 30 years time and lsl 'lost', or 3 months of SGC not being paid then COY bust.
the maximum loss is then limited to 1 week/month/fortnight or whatever

 

[MarketMatters]

Sorry, I stopped reading when I got to "means testing the family home"

That article is more political than economic. If the age pension blows out as that predicts, the Govt will either increase the super preservation age or limit your drawdown to an annuity instead of a lump sum.

Or they might tax large withdrawals.

Threatening the family home is political oblivion. IMO

All these points are in the government's think tank. A classic which was raised only a few years ago addressed people who are sitting on multi million dollar homes that recieve the Age Pension. They will some day be subject to having a portion of their house assessed as an asset which will affect their gov pension. Simple answer is to sell your house though this is a major social issue uprooting people from their homes.

Taxing withdrawals has been done in the past and wouldn't be surprised a limit on withdrawals will be introduced (pa) in the future to force people to manage their funds better or use annuities with no commutations.

 

[sptrawler]

Taxing withdrawals has been done in the past and wouldn't be surprised a limit on withdrawals will be introduced (pa) in the future to force people to manage their funds better or use annuities with no commutations.

I think Morrison alluded to this eventuallity, when he suggested allowing people access to their tax free component, for a housing deposit.
The Government has dropped the non concessional contribution limit, and labor imply they will drop it more, this would indicate a move toward a super system that is composed mainly of taxable(i.e controllable) contributions.

 

[MarketMatters]

I think Morrison alluded to this eventuallity, when he suggested allowing people access to their tax free component, for a housing deposit.
The Government has dropped the non concessional contribution limit, and labor imply they will drop it more, this would indicate a move toward a super system that is composed mainly of taxable(i.e controllable) contributions.

Gone are the days of the $1m non concessional contribution

 

[willy1111]

Very savvy investors might have been able to achieve these numbers over the past 9.5 years (i.e. capturing the bounce following GFC lows in early 2009), but I don't think you should expect 20% pa over the long term, taking into account complete market cycles.

Yes, expectation is said to be the mother of disappointment. Past performance is not an indication of future results - no one knows what the future holds.

Out of interest, do you know what is the 'acceptable' rate that is modeled for growth in equities over the long term for financial plans, and why is that rate used?

 

[sptrawler]

At last, the reporters are starting to announce the likely future of, retirement and what to expect.
The days of saying "who cares, i'll just go on the pension", are numbered , very numbered.
Then the real nasty fight starts, those who are entitled and those who aren't.
It hasn't been addressed yet, because most are entitled, those who aren't are low hanging fruit easily picked.

https://thewest.com.au/business/you...eed-more-than-1m-to-retire-well-ng-b88963433z

 

[MarketMatters]

Yes, expectation is said to be the mother of disappointment. Past performance is not an indication of future results - no one knows what the future holds.

Out of interest, do you know what is the 'acceptable' rate that is modeled for growth in equities over the long term for financial plans, and why is that rate used?

How long is a piece of string one might say. Many consultants eg. Rice Warner, Standard&Poors etc. are consulted for their analysis - inc. long term benchmarks, which Dealer groups will subscribe to and their investment committees employ in setting the framework for advisers. Overall their is no single acceptable rate but rather who you believe most correctly reflects your views (in this case it is who the dealer groups engage).

Here is one worthy of a look from an international perspective https://www.blackrock.com/instituti...nsights/blackrock-capital-markets-assumptions

One simple approach I have come across over the years is to employ the CPI+ methodology although determining the allocations to growth/defensive for each is variable.

High Growth - CPI +4%
Growth - CPI + 3.75%
Balanced Growth - CPI + 2.75%
Conservative Growth - CPI + 1%

If employing the above benchmarks for a pension fund you would, at minimum, add 0.5% to allow for drawdown compensation.

 

[sptrawler]

One simple approach I have come across over the years is to employ the CPI+ methodology although determining the allocations to growth/defensive for each is variable.

High Growth - CPI +4%
Growth - CPI + 3.75%
Balanced Growth - CPI + 2.75%
Conservative Growth - CPI + 1%

If employing the above benchmarks for a pension fund you would, at minimum, add 0.5% to allow for drawdown compensation.

I like that post MM, it can be applied to just about any super account, at any stage of its life.
Simple, achievable and sensible.

 

[sptrawler]

From a post in another thread, Australian super is moving its members out of property, this would indicate that Labor are going to implement the tax rules on property investment.
It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.

 

[SirRumpole]

Is the Morrison government good for retirees ?

Not according to some.

https://www.afr.com/personal-financ...ng-out-of-global-top-3-mercer-20181021-h16x5g

 

[basilio]

From a post in another thread, Australian super is moving its members out of property, this would indicate that Labor are going to implement the tax rules on property investment.
It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.

I wonder how bad this would be ?

Let's imagine a super scheme with a guaranteed return of 3% real. Minimal fees. Funds used, for example, to re engineer our national power grid to a publically owned renewable energy network.

It doesn't have to replace private super companies but offering a government guaranteed ROI for quality national infrastructure needs seems like a sensible and attractive idea.

 

[sptrawler]

I wonder how bad this would be ?

Let's imagine a super scheme with a guaranteed return of 3% real. Minimal fees. Funds used, for example, to re engineer our national power grid to a publically owned renewable energy network.

It doesn't have to replace private super companies but offering a government guaranteed ROI for quality national infrastructure needs seems like a sensible and attractive idea.

It wouldn't be bad at all, it has been done before and nobody cared, so why not do it again?
As someone here says wash, rinse, repeat.

 

[Junior]

From a post in another thread, Australian super is moving its members out of property, this would indicate that Labor are going to implement the tax rules on property investment.
It could also indicate, maybe industry funds are becoming an extension of the labor Government, interesting times.
Actually I wouldn't be surprised, if Labor get two terms of office, to see super as a section of Government.

They are simply making sure they don't have members with the majority of the super invested in illiquid assets. I don't think it has anything to do with tax changes.

 

[MarketMatters]

Is the Morrison government good for retirees ?

Not according to some.

https://www.afr.com/personal-financ...ng-out-of-global-top-3-mercer-20181021-h16x5g

Hmmm. I can think of worse rankings Australia has to worry about compared to falling from the top 3 retirement systems globally.

 

[sptrawler]

Hmmm. I can think of worse rankings Australia has to worry about compared to falling from the top 3 retirement systems globally.

That is a very good representation MM, it really does show how expensive it is to do business here.

 

[sptrawler]

Well silly Billy is sticking with the ludicrous franking credit stripping of SMSF's.
I just wish someone would do the sums on how much it will save, you would have to be as silly as Billy, to believe it will save $55billion.

https://www.smh.com.au/politics/fed...r-anger-in-super-inquiry-20181101-p50ddr.html

 

[sptrawler]

I was hoping some journalist might do the sums for me, but alas they are too busy with more important stuff.
So it is left to my year 10 maths to have a go.
So apparently there are approx 600,000 SMSF's in Australia, 85% have less than $2m in the fund and 50% of fund members are over 60. Also you can't have more than $1.6M in pension phase, so the rest is being taxed
SMSF's also have about 30% invested in shares.
So if most funds have two members, that would be about 600,000 people and if their average pension is for arguments sake $ 1m, which it wouldn't be it would be a lot less.
We then find that 30% is invested in shares, so again for arguments sake say $300,000 and they all get a fully franked return, that would be $9,000 each.

I hope Junior, Craft or McLovin can unravel it for me.

But my guess is in reality, it will be a saving of $500- $900M, which will be lost quickly as the principal runs down faster.
Just my thoughts.

 

[sptrawler]

I was hoping some journalist might do the sums for me, but alas they are too busy with more important stuff.
So it is left to my year 10 maths to have a go.
So apparently there are approx 600,000 SMSF's in Australia, 85% have less than $2m in the fund and 50% of fund members are over 60. Also you can't have more than $1.6M in pension phase, so the rest is being taxed
SMSF's also have about 30% invested in shares.
So if most funds have two members, that would be about 600,000 people and if their average pension is for arguments sake $ 1m, which it wouldn't be it would be a lot less.
We then find that 30% is invested in shares, so again for arguments sake say $300,000 and they all get a fully franked return, that would be $9,000 each.

I hope Junior, Craft or McLovin can unravel it for me.

But my guess is in reality, it will be a saving of $500- $900M, which will be lost quickly as the principal runs down faster.
Just my thoughts.

I just re read the post, my math's is crap, if the member has $300,000 in shares and they pay 5%.
That would mean they get a dividend of $15,000 and the franking credit would be 30% of that, so $5,000 tax return.
So how with me making high pension assumptions, 600,000 getting $5k works out to $55Billion is really weird.
I wish someone would ask silly Billy and Bowen, to please explain.