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What should the government’s super and retirement planning priorities be?

The superannuation world is ever-changing, which is why it’s so important to stay up-to-date with all the rules, caps, rates and thresholds. While many of the changes can be seen as the government fiddling with the rules or shifting the goalposts, many changes can be positive.

Government policy is never flawless and improvements can always be identified. Some policies are designed to be fairer while others may be designed to incentivise Australians to boost their super, or for the industry to cut their fees.

We asked some of Australia’s top experts in superannuation and retirement planning what they think the government should be focusing on.

Daniel Brammall

President of the Independent Financial Advisers Association of Australia (IFAAA)

People who are looking to plan their retirement (whether it’s 5 years away or 30 years away) ought to have access to the experience, skills and sophisticated financial forecasting tools that independent financial advisers possess. So we want high calibre advice to be more accessible and more affordable. To that end, here are the two keys we want the government to act on immediately:

  • Quality advice: the government to keep its promises to implement the Royal Commission’s recommendations, particularly 2.2 (warning as to lack of independence of financial adviser)
  • Affordable advice: make financial planning advice fees tax deductible if the adviser is a member of a government-recognised financial planning profession (i.e. an association operating a Professional Standards Scheme)

Daniel Butler

Director, DBA Lawyers

  • The transfer balance account (TBA) should become a self-assessment exercise for SMSFs rather than the complex reporting now. The reporting is not working and a lot of re-reporting is required and the ATO are experiencing a lot of errors. Many SMSF advisers are having lots of issues with the TBA reporting system and find this the worst part of the mid-2017 reforms.
  • Contribution caps should be increased. The concessional cap should increase to $50,000 per member and the non-concessional contribution cap should increase to $150,000 per financial year.
  • The gainful employment test should be removed as it no longer has relevance to the modern super system. The changes announced in the April 2019 Federal Budget should go further and remove any link to gainful employment altogether rather than just for those under 67 years
  • The superannuation guarantee (SG) rules need greater flexibility. Currently the complexity of getting the right calculation for contributions to satisfy the minimum 9.5% of ordinary time earnings is extremely complex given Australia has the most complex workplace set of rules and the most restrictive work practices in the world where multiple awards or industrial agreements may apply to the same employee and similarly different classifications under these multiple awards may apply to the same employee. Employers should not be hit with such a crushing penalty regime for making honest mistakes. The penalty regime needs to encourage voluntary compliance. An SG amnesty should be introduced for a 2 year minimum period so employers can rectify any past issues. Employers should be given an annual reconciliation period rather than getting caught out if each quarter is not precise. There is plenty of work on SG that is needed.
  • A genuine effort be made for ATO-Treasury-Industry to work together to cut down on wasteful and inefficient practices to reduce any red tape, eg, the TBAR system which has been and continues to be a real problem for SMSF practitioners. Further effort is required in reducing the red tape and paperwork associated with super which eats up retirement savings and is non-productive.
  • The Government should proceed with SMSFs having 6 members as soon as possible.
  • That the super system be treated with ‘respect’ and it is not there for Governments to readily raise tax from, and that successor governments must have regard to the long term goals of members and the super system rather than making changes that cut across members long term retirement goals for Government to extract further tax to balance its budgets from year to year.

Rafal Chomik and John Piggott

Senior Research Fellow at CEPAR and CEPAR Director and Scientia Professor of Economics at CEPAR (Centre of Excellence in Population Ageing Research

Australia’s retirement income system is in pretty good shape. It is expected to deliver adequate incomes to Australia’s retired population for many decades to come, with sustainability assured in the face of an ageing population.

But there is nevertheless plenty of room for improvement, so a comprehensive review is welcome. It’s an opportunity to resolve issues that have weighed on the system for years.

At the ARC Centre of Excellence in Population Ageing Research (CEPAR), we conducted our own review of research into the retirement income system in a series of Research Briefs. These also identify policy gaps that the Government’s review should revisit.

Whatever form the Government’s review takes, it is vital that it considers the interaction between different components of the system. Too often in the past, one aspect of the system has been examined without giving weight to the way in which it intersects with other parts. A comprehensive review provides an unusual opportunity to look at these together.

In doing so it should assess the current and projected adequacy of the safety net, the need for higher contributions, the framework that allows lump sums to be converted into retirement income, and the appropriateness of taxation settings.

When considering whether the safety net is adequate, it is important to anticipate future trends in the asset holdings of those who are less well off. Retirees without housing security are vulnerable under current policy settings, so we need to make sure that they are adequately supported by public payments such as the Age Pension and Commonwealth Rent Assistance. The role of housing as a retirement asset more generally will also need to be considered.

The review ought to consider the appropriate contribution rate mandated under the Superannuation Guarantee. In addition, more comprehensive mechanisms should be considered to draw non-employees into the superannuation system.

Retirement incomes can not only be increased by higher savings, but also by improving the efficiency of the system and better drawdown strategies. The Productivity Commission, in a recent review, has already suggested several policies that would help keeping costs down, and there are no doubt other possibilities. A comprehensive review must give this issue serious consideration.

The drawdown phase of retirement requires special attention. This should be an important part of the review – how to make drawdowns efficient, especially the management and sharing of risks people face in retirement.

Finally, the retirement income system sits within a broader taxation framework, and that framework must better accommodate settings that support the operation of the system we have adopted.

A comprehensive review provides the opportunity to assess the system against the objectives of adequacy, sustainability, efficiency, fairness, and simplicity and to make Australia’s retirement income system even better.

Graeme Colley

SuperConcepts Executive Manager SMSF Technical and Private Wealth

The Federal election and the conservative reaction of voters to proposed significant and inequitable change is a clear signal that stability with superannuation is essential.

What needs to be done is that the superannuation objectives bill should be passed to incorporate the superannuation objectives in legislation to moderate large swings in policy settings over time.

The legislation proposed prior to the election should be examined in light of the objective of superannuation so that it encourages people to save for their retirement.  Relevant proposals are those that would clarify some of the Super Reform legislation for pensions, the superannuation guarantee changes and the extension of contributions as announced in this year’s Federal Budget.

Jeremy Cooper

Chairman, Retirement Income, Challenger

The Superannuation (Objective) Bill 2016

Legislating the objectives of the super system was a key recommendation of the 2014 Murray Inquiry and it was a powerful one. Unfortunately, the Superannuation (Objective) Bill 2016, which sought to do this, was not passed during the life of the 45th Parliament. The major parties were unable to agree on the wording. This is a serious bit of unfinished business for the new Morrison government.

Here are a few thoughts on this.

Super is social infrastructure that transforms some of today’s wages into capital for spending as ‘retirement wages’ far into the future. In this way, household consumption can be smoothed out over a lifetime. The first dollar a worker contributes to super at age 25 might remain in the system for 50 or more years, until it is ready to be spent.

This is an epic maturity transformation; deferring a fortnightly wage and turning it into a 50-year compounding asset.

But, at some point, each dollar of super capital needs to be turned back into ‘retirement wages.’ It is not permanent capital. Super’s purpose is to create retirement income, but the sooner we work out what ‘retirement income’ means, via the Superannuation (Objective) Bill, the better.

The system is currently squibbing on this, at least in part because it suits the agents to hang onto the money. The result is that retirees are underspending and experiencing a lower standard of living than they can afford.

Sean Corbett

Sean has worked in the superannuation industry for more than 20 years and has a specialist knowledge of annuities

1. Amend the indexation of the $1.6 million pension transfer limit

I can see some justification for imposing this limit in terms of limiting the benefits accruing to the “rich” but it’s indexation needs to be amended in order to achieve that aim rather than eventually punishing everyone.

What is particularly interesting about this limit is that it is indexed by inflation, unlike all the other limits on contributions to superannuation that were included in the same suite of changes, which are indexed by wages.

The amount that someone saves in superannuation for their retirement is linked to their wages. Wages generally grow faster than inflation, so people’s superannuation balances at retirement will increase faster than inflation over time. Therefore, people’s super balances at retirement will increase faster than the limit will increase. This will lead to more and more of people’s superannuation savings when they reach retirement exceeding the limit.

The tax on earnings that is applied to pension accounts within superannuation is nil, while the tax on earnings that is applied to non-pension accounts is 15%. The limit constrains the amount of superannuation at retirement that can be transferred to a pension account. Because the limit won’t grow as fast as people’s retirement balances, over time more and more people will have more and more tax applied to their superannuation savings in retirement.

At some point in the future the failure of the limit to keep up with people’s superannuation balances when they reach retirement will lead to an increase in tax that will not just apply to the “rich”, it will apply to the average person and, over the very long run, it will apply to everyone.

Higher taxes on retirement savings mean that those savings will either provide a lower level of income or they will provide an income for a shorter period or a combination of the two. More and more people will therefore be forced to rely on the Age Pension in retirement, increasing the burden on the government and working taxpayers.

As a solution, at the very least the limit should be indexed to AWOTE and increased by much smaller increments than the ridiculously high increment of $100,000, which will be reached less often in a low inflation environment.

2. Reverse the changes to the taper rate for the assets test

This change resulted in the rate at which the Age Pension was reduced as you saved more superannuation being doubled. It therefore introduces a very strong disincentive for people to save more superannuation for retirement.

The change resulted in retirees going from a situation where they received most of any additional super they saved back as total income over retirement (income from super plus Age Pension income) to a situation where they get back much less of any additional savings as total income in retirement.

Furthermore, people with more super who try to draw a regular income from their superannuation that will last for their retirement and index that income to keep up with inflation will find that their total income in the earlier years of retirement will be lower than people with less super.

This is true across a very broad range of balances at retirement from around $400,000 to over $1 million which covers what many retirees can expect to have at retirement in their superannuation.

This change manages to both overly punish those who attempt to save more super in order to provide a better life for themselves in retirement without relying on the working taxpayer / government and encourages people to dissipate their super more quickly in retirement.

As a solution, the change should be reversed and the taper rate that prevailed before the change reinstated.

John Daley and Brendan Coates

John Daley is CEO and Brendan Coates a Fellow at the Grattan Institute

The Morrison Government confronts a big agenda when it comes to retirement incomes. They need to implement the superannuation recommendations of the Hayne Royal Commission and respond to the Productivity Commission inquiry into superannuation costs. And Treasurer Josh Frydenberg hopes to establish an independent review of the retirement incomes system. Here’s what their priorities should be:

  • Australia needs a new retirement incomes standard
  • Scrap the increase in compulsory super to 12 per cent
  • Reduce Australia’s woefully high super fees

John and Brendan have expanded on these points in the article Three retirement income priorities for the returned Morrison Government.

Dante de Gori

CEO of the Financial Planning Association (FPA)

The super system has undergone significant changes in recent years, with participants adjusting to new rules and requirements. As a first principle, the Government should be cautious with any further reforms to superannuation to ensure the benefits of reform aren’t overwhelmed by short-term disruption.

The proliferation of multiple accounts and underperforming super funds continues to be a drain on Australians’ retirement savings and should be a focus for the Government’s policy work. Initiatives to improve Australians’ engagement with their superannuation well before they reach retirement age will help them make better decisions and should form part of any solution. The lack of portability of insurance is a common obstacle to reducing multiple superannuation accounts and needs to be addressed.

Boosting the retirement savings of women is a priority and the Government should report on the retirement income gap between men and women. Extending the superannuation guarantee to paid parental leave and carers leave would be a good step towards closing the gap.

The FPA welcomes the Government’s interest in a review of the role of superannuation in retirement income and we encourage the review to consider the role that professional financial planning plays alongside superannuation in supporting Australians achieve their retirement goals.

Graham Hand

Managing Editor of Cuffelinks

Let’s bore you with some numbers to start, to show you how the world will change in the next three decades. I’ve chosen 30 years because the life expectancy of a female born today is 94. Retirees at 65 today need to plan not to run out of money until at least 2050.

  • According to actuaries Milliman, health issues now comprise 24% of the spending of 85-year-olds, up from 12% for 65-year-olds.
  • ABS data shows there are 7.3 million Millennials in Australia, versus 4.8 million Baby Boomers.
  • The Intergenerational Report says that in 1975, there were 7.3 workers (or people aged 18-65) for every retiree, but by 2050, it will fall to only 2.7.
  • The same Report says 5% of the population will be over 85 by 2050.

So what? Well, where will government revenue come from in future? Baby Boomers are now aged between 55 and 73. Many have led blessed lives of free education, strong economic growth, generous superannuation rules, cheaper housing and world peace and trade. The younger generations know this, and they will increasingly outvote the old folk. Gradually, age pensions will pay less, entitlement will become stricter, super rules will tighten, health will be more user-pays and aged care will rise in price. The Baby Boomers who are not self-funding their retirement will struggle.

There’s a solution right on the doorstep: the equity tied up in the family home (which at some point will no longer be exempt from the assets test). The fact that a person can own a $5 million house and claim a full pension, plus associated health benefits, is inequitable with increasingly cash-strapped budgets. We are seeing an early move with the enhanced Pension Loan Scheme. AMP’s modelling suggests a single person can borrow on this scheme up to $36,000 a year, and a couple $54,000, paid in fortnightly instalments.

This is the start. It will not be long until it is expected that anyone who owns their own house will be expected to draw on home equity rather than receive an age pension, and a chunk of the money will go into health rather than the next trip to Europe.

Amara Haqqani

Director, Strategy and Solutions, Milliman

It’s time for the  Morrison Government to take stock on all things super. 2018 was a busy and high profile year with the 2017 and 2018 budget changes, the Productivity Commission and the Royal Commission. It’s important now to not only ensure that the lessons learned are not forgotten, but that also we conversely sift through all the noise to get to the heart of the issues: retirement is a long term game, and it cannot be viewed with a short term policy lens.

As a result, to my mind, all of last year’s issues point to three key things: we must not lose sight of truly putting the member first, we must remember that doing so is not purely about fees and returns, and we must not let some bad eggs ruin the overall notion that people will always need financial advice.

This means that the government needs to ensure that the upcoming regulations for the member outcomes regime, clearly outlines what is expected of a fund’s knowledge and that they have a true understanding of their member’s needs and retirement goals. The government needs to also prioritise overhauling the advice rules and outcomes from the Royal Commission, allowing new forms of adviser technology to complement advice and enable better service for the public – at a time when they need more options than traditionally, advisers have been able to provide.

Martin Heffron

Executive Director, Heffron SMSF Solutions

One of the first things Josh Frydenberg did after the Coalition’s shock election win last week was to express his support for the Productivity Commission’s recommendation of (yet another) review into our retirement incomes system. Unfortunately, however, a review into retirement incomes in isolation is at risk of missing the point.

The societal challenge of an ageing population is well known and has been widely discussed. The increase in longevity creates three separate but linked high level needs:

  • Health care
  • Aged care (including accommodation)
  • Retirement income provision

In most developed countries these three needs are partly funded by the state and partly funded by the individual.  Often, the proportion of public versus private funding depends on an individual’s means. At any rate, all three needs are increasingly expensive and complex areas for state and citizen alike that require strong coordinated policy responses. Sadly, this co-ordination is currently lacking in Australia.

At least the Productivity Commission’s recommendation was to look at retirement incomes holistically rather than just superannuation but given the nature of the problem, we need to be even broader than that and look at the problems presented by aging overall. If we are going to go through the time, expense and pain of another review, wouldn’t it be great if we engaged with the problem at the right altitude and in a coordinated fashion?

Paul Howes

National Sector Leader, Asset & Wealth Management and National Leader, Customer, Brand & Marketing Advisory, KPMG Australia

The Federal Government’s key focus area for superannuation should be providing certainty around a retirement income framework.

While the accumulation phase within our super system is well developed and globally leading, there are significant opportunities to develop innovative retirement products to meet the diverse range of needs of members transitioning to retirement.

The government has consulted over the past year around a Retirement Income Covenant and Comprehensive Income Products for Retirement (CIPRs) and disclosure to facilitate consumers to self-select a retirement product,  however has yet to provide a framework. The sooner certainty is provided by government, the sooner funds can act and further develop our retirement income system.

Stephen Huppert

Stephen is an independent consultant and advisor working with institutions big and small that are committed to improving the retirement outcomes of Australians. 

The primary objective of the superannuation system is not to accumulate retirement savings but to provide retirement income. The areas where the superannuation and retirement income system needs work are:

  • Helping Australians increase their retirement savings; and
  • Helping Australians convert their retirement savings into appropriate retirement incomes.

Most of the focus for the last couple of decades has been on the former – and that work has not yet finished. However, saving for retirement is necessary but not sufficient to improving outcomes in retirement.

We need tweaks to the current SGC system to make it more relevant to broader parts of society. A lot has been written about the gender gap in both salaries and therefore retirement savings. As well as addressing the salary gap, there are a range of initiatives to address the retirement savings gap including SGC payments on parental leave and improving SGC coverage of part-time and casual workers. The  latter will address a broader issue than just the gender gap.

Another high priority to increase retirement savings must be to address the epidemic of unpaid superannuation. Recent reports have highlighted the extent of this problem and it needs to be addresses so all workers receive their entitlements.

Whilst Australia has done a good job of increasing the size of retirement savings compared to other countries, there is still a long way to go to help people convert their retirement savings into appropriate retirement income streams. These needs to be done via a range of products and services that assist retirees understand their needs and preferences, and then match them to appropriate products.

The Government should continue where it left off prior to the election with the introduction of the Retirement Income Covenant including the requirement for superannuation funds to offer a broader range of products at retirement, especially those that provide protection against longevity risk.

Xavier O’Halloran

Acting Director – Superannuation Consumers’ Centre

Before the election the Government passed great consumer protections to clean up the glut of erosive duplicate accounts, saving Australians millions of dollars for their retirement.

We support the reintroduction of its legislation to protect people from inappropriate insurance, which entirely wipes out the savings of many young people. It’s completely unacceptable that for some young people their first experience of superannuation is to discover their savings have been eaten away by zombie insurance policies.

We are going to need a two pronged attack if we want to see people moved out of poor performing funds and into the best. APRA’s new powers directed at weeding out funds that aren’t delivering for members is going to take time. APRA needs a bright line test in the regulations if it is really going to turn up the heat on merger activity.

Getting rid of the poor performers alone won’t solve the problem of poor competition, we need to be helping people find funds with the best likelihood of success. Therefore we want to see urgent action on fixing the default superannuation system. This is where the biggest potential savings lie for people. The Productivity Commission found that those ending up in a poor performing fund stand to be half a million dollars worse off when the retire, compared to a top fund. The PC’s recommendation of ‘best in show’ is worth trialling and refining in the real world, so that people aren’t left to languish in underperforming funds.

Liam Shorte

Family Trust and SMSF Specialist Advisor, Verante

I believe that we need some stability and restraint when it comes to any further superannuation legislation. What people want is some certainty that if they forego salary and wages to save for retirement that this will benefit them in the long term not disadvantage them. The average mum and dad who have saved (as opposed to the average couple who just have employer contributions) have basically lost out since the changes to the Age Pension tapering rate. Often a couple with $860,000 of savings has a worse annual income outcome than a couple with  $387,500 who get the full pension. Don’t try to tell someone at 65 that they should spend their capital because frankly the prospect of 25+ more years of life and the increased costs of healthcare, aged care and possible GFC events scares the living daylights out of them. Remember these are people who have lived through recessions as adults unlike anyone under 45.

If we want people to be able to plan for retirement and have the confidence to use some of their capital earlier in retirement then better education on budgeting, medical and aged care costs needs to be provided like on the MoneySmart website but promoted much more so people know it is there and it becomes a go to source for unconflicted guidance. The introduction of the ASFA Retirement Standard has provided great information to use in those conversations with people entering retirement who have never really budgeted. The Government needs to take the lead and promote this sort of data and do the same for Aged Care costs and pros and cons of downsizing or the alternative of access the Pension Loans Scheme.

Noel Whittaker

International bestselling author, finance and investment expert, radio broadcaster, newspaper columnist and public speaker

People are sick of the continual changes to the superannuation regulations. The first thing the government should do is enact legislation, with the support of the opposition, that no fundamental changes will be made to the system within the next five years. This would allow retirees to have more confidence in planning their future.

Most retired people are in pension mode. This requires a minimum drawdown from their pension fund each year which is based on the balance at the previous 30 June. The percentage to be drawn increases with age. For example it is 6% of the balance for those aged between 75 and 79 and 9% of the balance for those aged between 85 and 89. There has been a massive increase in life expectancies is since these numbers were legislated, and there is good reason to reduce them to help retirees make sure that their capital lasts as long as they do.

Under existing rules, a person cannot contribute to superannuation once they turn 65 unless they can pass the work test which involves working 40 hours in 30 consecutive days in the financial year in which they make the contribution. Repeated efforts to simply raise the contribution age 75 have been resisted by Labor and the Greens. The age limit should be raised to 75.


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Brian Richards
June 23, 2019

I wonder how many people who own a $5m dollar house are on the pension?, not many I suspect even in Sydney's overvalued house market.
To see this government reverse its retrospective change to the assets test is very unlikely although would be equitable, especially given the current PM introduced it.
One of the things most people conveniently forget is that the so called baby boomers had to pay up to 18% on mortgage finance and over the term of the loan averaged in our case 12%!, I wonder how current mortgage payers would cope with that, a quick calculation suggests most wouldn't,t be able to service their mortgages and eat at the same time!

SMSF Trustee
June 24, 2019

Be good to have data rather than guessing, conjecture and innuendo. I personally know a few elderly people who moved into their homes 40 or more years ago, have not been high income earners but now sit on a multi-million dollar house.

Is it right to just infer that they're rich and so should sell up and be forced to leave their home? At a time when so much effort is going into home care for the aged too!

June 21, 2019

With the current immigration settings and the gig economy, the super planning and priorities won’t matter. Millennials won’t have any super and will be consigned to a life of slavery.

Richard Jackson
June 20, 2019

Hello Graham

As a planner for 20 years specialising in retired clients across the retirement age spectrum, I completely agree with your comments in the SuperGuide article in Cuffelinks today.

In my experience an outcome of the current system for funding health and residential age care during what I what think of as the ‘end of life’ stage, is that working Australians pay additional tax to protect the bequests of the testamentary beneficiaries of affluent Australians. I feel this is very inequitable.

Health and residential age care costs for people in the last 18 months or so of their life are astronomical and are mainly borne by the tax payer. Even if the elderly person has significant assets, the tax payer foots much of the bill. The alternative is that the home equity of the ‘end of life’ stage person be accessed, mostly likely through a pension loans scheme like arrangement, to help pay for care but with no impact on the quality or scope of care. The funds bequeathed to beneficiaries of the ‘end of life’ stage person would be reduced but I feel this is more equitable than taxing ordinary working Australians. Particularly as many of those beneficiaries are Baby Boomers who have already benefited from their ‘blessed lives’.

When a politician capable of articulating this issue emerges, change will follow. But there is little sign of this, indeed I feel the ‘left’ or ‘progressive’ side of politics in Australia is letting the people it purports to care about down very badly indeed by failing to do the hard work necessary to master these complex issues and drive the reform we need.

Best Regards

June 20, 2019

"This change resulted in the rate at which the Age Pension was reduced as you saved more superannuation being doubled. It therefore introduces a very strong disincentive for people to save more superannuation for retirement. ... As a solution, the change should be reversed and the taper rate that prevailed before the change reinstated.":

Age Pension for all age qualified.

Financed by income tax on Age Pension - but not on withdrawals from taxed super.

June 20, 2019

The second half of Liam Shorte's first paragraph is a succinct response to all the various, no doubt younger, commenters on comment pages various where the question arises, who say "Spend your capital!"

The point about recessions is particularly germane. Those who've experienced one or more as a working adult have a perspective which those who haven't simply cannot appreciate.

Paul Dwyer
June 20, 2019

The Government's move into reverse mortgages (Pension Loan Scheme) raises some interesting questions about its role as a bank to retirees.

The original concept behind the decision was to allow all retirees access to funds secured by property in order to contribute to the cost of Home Care - the recipients to be means tested similar to residential aged care and including the family home.

The question arises why a self funded retiree can access $54,000 per annum as an income stream at a preferable interest rate in comparison to the private market. Similar to why a $5.0m dollar homeowner can access the full age pension.

Whilst Government believes the annual intake will be around 2,000 applications, it is more likely to be 2,000 in the first week.

There are tens of thousands of retirees who will be willing to access $12,000 a single or $18,000 per couple to enjoy a better standard of living in retirement.

We are yet to realise the importance of releasing home equity as the fourth pillar of retirement income.

Home owners should not view themselves as "financial failures" if they are not self-funded in retirement. For those who have paid off all/most of their mortgage, they should be acknowledged for the success of being a homeowner.

We recognise the importance of a satisfactory income has upon the health and well-being of older Australians. Too often we see retirees limiting heating/cooling, not buying a range of appropriate meats and vegetables, becoming socially isolated, and losing their purpose in later years.

The Government's reverse mortgage will become an important part of retirement income, and further develop the private market which will be able to fund any lump sum needs not available under PLS


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