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Are banks misjudging retirees?

Banks can be frustrating to deal with as one of our readers recently discovered. How much should a bank amend its usual policies based on the age or retirement status of the client? Do they recognise that with improving longevity, a 60-year-old is now likely to live many more decades? We describe the retiree's frustrations, and we invite others to comment on ways they have been 'discriminated' against based on retirement or status.

Our reader retired six years ago and is self-funded with $3 million in investments, no debts and a strong credit rating. He will not receive a government age pension. He was shocked when he wanted to renew a Line of Credit (LOC) at AMP which was due for rollover. He was told by his adviser that there was no point applying for a new LOC. The adviser eventually told him it would be rejected because he was retired.

Last year he tried to have his credit card limit lifted from $6,000 to $7,000 at CBA. His local branch told him that if he applied it would likely be rejected, again because he was retired. A letter of complaint to the CEO of CBA resulted in the extra $1,000 being approved. Meanwhile, his wife who is still working left $8,000 in her CBA bank account for three months and was offered a credit card limit increase from $8,000 to $12,000. But he had left $8,000 in his bank account for six months yet there was no offer to increase his limit.

Then, last week, he called into Citibank after trying to contact them online or by the phone. He wanted to put money into his multicurrency account. A simple request but he is still waiting for his new relationship manager to call him. From the start of communications to now has been seven working days, and he is feeling neglected. The multicurrency amount was to be $100,000.

So why are different banks ignoring him or refusing him credit? Are other retirees receiving similar treatment? We would welcome your comments on how banks have been treating you since retirement.

August 02, 2017

Similar experience here. Self funded retiree, significant assets inside and outside super. Was barely able to get a new credit card with a $6,000 limit. This particular bank has a policy of not counting bank interest earned as part of one's annual income.

Corey Batt
July 31, 2017

Lenders have differing policy of age policy - generally lenders are wanting to see personal debts being able to demonstrate the debt being extinguished by 75. This is becoming increasingly common with lenders being concerned about being able to show they are meeting their responsible lending requirements.This isn't just an issue for retirees, but now over 55's with a lot of lenders are having an increasing focus on how they will repay any outstanding liabilities.

There are some lenders who are able to provide investment loan facilities which have terms beyond 75, but you need to use specific lenders who are more amenable to working with retirees/those over 55.

Corey Batt
Precision Funding / Precision Private Wealth

July 28, 2017

Totally agree -they are fixated on employed income (despite the fact that employment can be terminated pretty easily). With my spouse and self having $5m in investment assets (in addition to a well positioned Sydney house) in Trust or SMSF they do not really want to talk to me about some extra loans to diversify our portfolio.

John Hoare
July 28, 2017

Maybe Credit is a problem because your money is all in super. Banks have limited recourse to super so in reality it is no security at all. They also cop flak when they want to sell up your home.
You are retired comfortably, well off so get on with it.
If you had an income stream outside super I doubt you would have a problem.
Talk to your kids. They are going to pay the taxes to keep you alive. That $400000 medical treatment that is your entitlement should ill health befall you. Maybe this is as good as it gets. People are living longer because younger taxpayers are footing the bill. Seems to me that reader does have too much to whinge about. He may if he lives long enough.

July 28, 2017

hiya John.

To an extent I would agree with you,however money outside of super is still a problem.

I had a line of credit on a house.$100k maximum.Paid at $600 every fortnight,the loan was down to $46K.Fixed rate for three years and due for rollover.I think the rate fell from around 5% to 3.8% for the rollover.

The (small) bank contacted me to discuss the rollover,I said take the loan up to $50 k and put the money into the offset account which they said I could link to the mortgage.I would take the offset account up to $50K by depositing further money.The girl seemed baffled by this and said she would have to call me back the next day.The next day never came.

Calling them back it was always a case of ,we'll call you back with an answer.Then somebody else took my call,go through all the financials again,we'll call you back with an answer.

They surprised me and called back two days later.How did I propose to pay back the loan as I was retired.Would it be paid out of super?.

No the loan will continue to be paid back at $600 fortnightly from the $50K which will be in the offset account,sitting there if I ever need it.Baffled again,can I call you back,how do you live?

Explained again dividends and rental income.a high annual income.Then I was told that is a very risky income.I asked why.The answer,because share prices change every day,and they only ever go down.Can we call you back,it seems a very risky mortgage.

No ,I'll come in next week and give you 46k to pay the mortgage off .Some weeks later they call me and say why did I pay off the mortgage.They had been trying all ways to contact me.That was strange,no e-mail,no message on my answer m/c,perhaps the carrier pigeon didn't get through.

It can be a problem for retirees to get money,and it is understandable why the bank would not want to go through the hassle of foreclosing on a house.

Kenneth Maurice Ellis
July 27, 2017

I feel for those who are rejected by their bank but I must be lucky. Retired 18 years ago and with my next birthday being my 80th any challenges I have had with Westpac has been sorted out when I visit my branch and have a one-on-one interview. I also have experienced problems on line because of the lack of flexibility that is programmed into the computer. Westpac may be worth a try but ensure your speak with a human being. Best of luck

July 27, 2017

After I retired about a year ago I decided to refinance a $750K loan with a "Big Four" bank and approached a mortgage broker for assistance. I think the broker had a panel of a dozen or so banks that they dealt with and I was very surprised to be told that it might be difficult to refinance the loan. The reason given was limited "primary source of income", although I do have a $45K pension from some years when I was in the CSS. The LVR was about 35% of the value of the property and net financial assets (majority in our SMSF) were enough to produce investment income after loan expenses of three times the P&I repayments. I am financially literate and, when working, was in a finance-related profession.
As it turned out, MBL was prepared to do the refinancing saving me 75bps on the previous interest rate (I really should have paid more attention to markets rates earlier, shouldn't I) but the experience did confirm that many banks tend to adopt some rather inflexible rules that don't operate very favourably for retirees. I wonder what they were concerned about - in my case it couldn't possibly have been security of repayment given the LVR and other pertinent facts. It must have been more a reputational concern if they did have to foreclose - though this seems to suggest that they had very little confidence in my financial "nous".

Dave from WA
July 27, 2017

I retired in December 2012. In March 2017, ANZ Bank advised me that the American Express card was to be discontinued, and the partner VISA card would reduce the spend limit applicable to the earning of Qantas FF points from $3,500 to $500 points with effect from beginning August 2017.

I hunted around for a suitable replacement Qantas FF card, and approached HSBC for their Platinum Qantas credit card. Around 10 days later, I was asked for the following information:

Rental statements from the managing agent in respect of 5 investment properties, one with a small loan, the balance owned outright. Value approx. $2,750,000, producing a cash flow of $84,000 pa before Capital and Depreciation allowances (no effect on cash flow).

Certified copy of the Last Income tax assessment (2016)

Certfied Evidence of my pension from my SMSF ($14,000pa), and explained that I had elected to convert only 20% of my Accumulation Account ($1.45 million) to Pension phase, and gave written reasons why (mainly tax rates).

Copies of statements of liquid investments (cash, term deposits, and listed shares - around $250,000).

Total cash income over $100,000 pa.

The application to decision process took around 5 weeks. I requested a credit limit of $12,000.

I am a Chartered Accountant (us CA's are really not the worst credit risk on the planet), and at the end of the day was gobsmacked to hear that my application was declined. Was it because I am retired? Who knows, HSBC refused to give me a reason.

Moved on to American Express and Jetstar for a card from each, and was given the nod within seven days, for a total combined spend limit of $22,500.

I guess it is a case of things are what they are.

July 27, 2017

Similar problem to get credit card limit increased from $7000 to $10000.
Was warned credit determinations performed by computer
Income approx $40000
Assets over $1million


July 27, 2017

There has been a spate of refurbishing of bank branches and making them "modern".
When waiting for a teller, there in now nowhere to sit down. My wife and I are both in our 70s and cannot stand for long periods in a queue, which is often the situation at busy banks.
I have raised this situation with several different banks, and am told I can wait over there in the corner on a chair until the queue is shorter. Charming - no consideration for older or handicapped customers.

July 27, 2017

One of the issues that banks need to consider here is that for many self funded retirees, there is a limit on how much money can be set aside for a pension following the application of the Transfer Balance Cap. Yet the fund may be earning significantly more income than needs to be paid as a minimum pension. This means that a prudent retiree can still make lump sum withdrawals from the accumulation account in addition to the minimum pension paid from the fund, in order to maintain a higher lifestyle, and still leave savings in the fund for growth or capital protection.
Questions posed by banks when assessing credit risk for credit card debts only seem to focus on the individual's own income and outgoings. On that information alone it might suggest an inability to fund repayment of credit card debt let alone with a higher credit limit. In my recent experience the questions are provided in an on line application which are very specific, carry fraud warnings about providing incorrect information and there is no opportunity to explain how a higher credit limit would be easily managed from capital held in the fund, aside from pensions.

July 27, 2017

A real issue that will gain more prominence as the ageing demographics gather force. Many retirees have similar experiences.

A useful way of addressing the problem is to threaten to take away existing business held with the intermediary, or negotiate with another a bundled product and service. Despite lip service to the concept of potential income from a relationship, many institutions do not assess customer requests on this basis. They will, if forced.

paul murphy
July 27, 2017

This example of customer diservice is not exclusive to "bank world" ! Bank bashing is a popular media past time ....isn't it ?

July 27, 2017

This is interesting - I have only recently retired and to date have had no issues but then I also haven't tried to make any significant banking changes. Will keep the 'retired = no interest' issue in mind when I do!


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