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Keating versus Hume: where willy-nilly meets obscene

Senator Jane Hume is treading on ground where many other Liberal warriors were buried at the dispatch box. Whatever you think of Paul Keating, few have matched his devastating one-liners which will live long in the annals of Australian politics. There is even a Paul Keating Insult Appreciation Society on Facebook with 64,000 members. He told John Hewson in 1992: “I want to do you slowly." In 1984, he said of Andrew Peacock: “Put him down like a faithful old dog” and in 2007, for John Howard, it was: “The little desiccated coconut’s under pressure.”

To give Ms Hume her full title, she is Assistant Minister for Superannuation, Financial Services and Financial Technology, and leads the Government’s prosecution on super policy. And to also give Ms Hume full credit, she is giving as good as she gets in response to Mr Keating at the moment, although he no longer has the benefit of a parliamentary display platform to fully perform his tricks.

Jane Hume and Paul Keating are kicking around a favourite political football, superannuation, but what's the score at half time?  

The scoreboard on early access to super

Treasury initially estimated that $29 billion would be withdrawn from super when the early release was announced in response to COVID-19. With the scheme now extended until the end of 2020, the estimate has been revised to $42 billion. Around 2.6 million people have used the scheme, with 620,000 emptying their super accounts completely. Here is progress to 9 August 2020 according to APRA, reaching $32 billion with the average payment of $7,700 and 97% of applications approved.

Value of applications (cumulative)

What is Hume versus Keating about?

Wherever Paul Keating goes in politics, controversy and sport are sure to follow. He’s not a man with uncertain views, but nor is Hume a woman afraid to defend her policies.

Here’s the rub. In response to the pandemic, contradicting the previous firm policy to lock up super until retirement, the Government and Hume are prosecuting the view on super that “it’s your money”. That is, people are entitled to access it early if they need to.

Consider this interview with Laura Jayes on Sky News on 21 April 2020.

Jayes: Is there a chance here that if we do see a lot of young people take up this offer of essentially $20,000 of early money from their superannuation, does it weaken the system years down the track and is that just putting off a problem for another day?

Hume: Well, we think people are best placed to make those decisions themselves and you've got to think about the counterfactual. What would be the effect of leaving that money in superannuation but not being able to pay your mortgage, not being able to pay off a credit card, having to sell something like your car just to get by? So it really is a decision for individuals. We're certainly not encouraging people to take up the offer but we're giving them the option to make an assessment about their own financial situation, their own family budgets.

So the money belongs to the investor and if they need it for “their own financial situation, their own family budgets”, they are entitled to have it.

Keating calls this "generational theft". He spoke at a virtual conference run by Industry Super Australia on 4 August 2020:

“It is a breach of the preservation rules to just let anyone take out their money willy-nilly. There has been no scrutiny whatsoever ... The whole point of superannuation was a great public bargain with the community: defer consumption for your working life and you will get a very low rate of tax.”

Keating argued that much of the money was probably spent on discretionary items such as cars, boats and motorcycles, and the long-term savings of young Australians are now compromised. As others have argued, the people who needed money could have been protected by the right fiscal policy:

“Every dollar which came out of young peoples' super balances could have been funded by one press of the computer button at the Reserve Bank.”

Hume responded in interviews and on Twitter, repeating the “it’s your money” mantra.

In an interview with The Australian Financial Review on 12 August, Ms Hume said:

“The idea that the wagons need to be circled around one sector in order to protect one man’s legacy - especially in a time of crisis - is obscene [and] irresponsible. It demonstrates a fundamental misunderstanding of the system he supposedly set up.”

She argued that access to super had always been available on compassionate grounds. She also criticised the super system generally with another slight at Keating:

“Fees are too high; there are insurances being applied inappropriately that are eroding peoples balances; there are duplicate accounts out there and a tail of underperforming funds; and many of those problems are directly correlated with the origins of superannuation in the industrial relations system.”

Studs up in the tackle, Keating says access is 'willy-nilly' theft and Hume says protecting his legacy is obscene. Who has the scars?

Was access ‘willy-nilly’?

One clear point of difference between Hume and Keating is his claim that locking super away until retirement is severely compromised by the ease of access, whereas Hume argues it was more an extension of the existing compassionate grounds.

Qualifying for early release requires a loss of job or reduction in working hours of at least 20% since 1 January 2020. While this sounds like a high bar, the lax part was not so much these tests but the simple online application process with no vetting.

The ATO confirmed the online access was easy. Second Commissioner Jeremy Hirschhorn told a Senate committee that the ATO did not check eligibility due to the dire circumstances around the pandemic:

"This is about getting emergency money to people. We will never have enough information to reject quickly, we will give people their money on the basis of their say so.”

So the ATO assumed people were honest. Brave. The Government does not trust people for anything relating to social security, where pensioners are subject to close scrutiny and checks. After the initial flurry, the Government issued warnings about compliance and penalties, but it did little to halt applications. Hume continued to defend the system and the applicants, saying:

“Australians who have made the decision to access their super early can rest assured that the Morrison government trusts them. They understand that withdrawing some money now comes with a trade-off down the track—but the decision is theirs.”

This is a long way from the previous tightly controlled compassionate access, to say it’s a matter of trust and “the decision is theirs”. Applicants declared their eligibility on an ATO website to receive payment a few days later from their super fund.

Whatever happened to super’s objective?

Remember the good old days - if 2015 can be called old - when most people supported the objective of superannuation. David Murray’s Financial System Inquiry had recommended that:

“the objective of the superannuation system is to provide income in retirement to substitute or supplement the age pension.”

In October 2015, the Liberal Government announced it would enshrine the objective in legislation, it issued a discussion paper in March 2016 and by November 2016, the Superannuation (Objective) Bill 2016, was introduced.

Then it stalled. The years have rolled by, including regular beseeching to put it back on the agenda, to no avail. We are now further away from defining the objective than five years ago.

And let’s not forget the sole purpose test

To quote directly from the ATO website’s SMSF section on the sole purpose test:

“Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

Contravening the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could face civil and criminal penalties.”

That’s unambiguous. The fund is maintained to provide retirement benefits.

What was the money spent on?

The most frequently quoted data tracking the use of early super withdrawals comes from consulting firm AlphaBeta (part of Accenture) and credit bureau, illion. They claim that 40% of people who accessed super early had experienced no fall in their income during the COVID-19 crisis, and only 22% in Round 1 and 24% in Round 2 of withdrawals were spent on essentials. Discretionary items included gambling (11% of money spent) and clothing (10%), while 12% in Round 2 was for debt repayment, as shown below. Hume has disputed these results.

The ABS has produced separate data on the way stimulus payments such as JobKeeper have been used.

Notwithstanding the lack of firm evidence, no doubt much of the money directed at retailers such as Kogan and JB Hi Fi, who have experienced rapid increases in sales in recent months, came from both stimulus spending and people accessing their super.    


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Three implications of the early withdrawals

What are the consequences of this early access? Here are three:

1. Decline in total super in the system in future

Early access to super will compound the adverse impact of COVID-19 on future super balances, with BetaShares estimating the $30 billion withdrawn to date will reduce future balances by over $100 billion:

“An amount between $100 billion and $130 billion represents a very significant future shortfall (which will only increase as further super is released early). It will need to be funded by future Australian governments and therefore the Australian public will ultimately bear the cost, as those who have withdrawn super will be less able to fully fund their own retirement needs.”

Other estimates place this in a broader context of future super reductions due to COVID-19. Current superannuation balances are about $3 trillion, and Rainmaker previously projected retirement savings would reach $10 trillion over the next two decades. Their Superannuation Projection Model has now revised the number to $7 trillion due to the virus, including the impacts of rising unemployment, lower super contributions, lower long-run earnings and reduced population growth.

The early release is only one factor but Alex Dunnin, Executive Director of Research and Compliance at Rainmaker, said:

"This lower projected outlook for superannuation savings could have significant economic consequences on Australia if it is not carefully managed."

2. Lower personal superannuation balances

Writing in Firstlinks when the early release policy was announced, and assuming savings grow annually at a rate of 3% above inflation less 0.5% administration fees, David Bell calculated the withdrawal of $20,000 has a different impact depending on age. A younger person at 30 loses $50,000 in their retirement balance.

Current age

30

40

50

60

Reduction in retirement balance

$50,000

$39,000

$30,000

$24,000

The estimates obviously depend on the assumptions and it's easy to derive bigger numbers. For example, BetaShares reports:

"Based on an annual growth rate of 5% plus CPI, $10,000 withdrawn today becomes a $70,400 nest egg over 40 years. When an average annual rate of 7% plus CPI is used, this increases to $149,745."

Either way, the predominantly young people withdrawing their super will miss out on compounding over so many years that their super balances will face a big hit.

3. Changes in the management of large super funds

Large super funds, especially industry funds which rely on large numbers of small investors locking in their super until a gradual drawdown in retirement, must now factor in far greater likelihood of withdrawals. If governments believe "it's their money" then any crisis could lead to further relaxation and access.

As David Elia, Chief Executive of industry super fund, Hostplus, said:

“This has created a form of regulatory risk in the super system that we’ve probably never seen before, and now we’re completely aware of and cognisant of.”

Keating added to his earlier comments that the early access scheme had a "distortionary" effect on investment management by forcing funds to hold more cash.

Industry funds were previously able to hold a higher level of illiquid assets such as unlisted property, infrastructure and private equity than retail funds, and now must be recalibrating their portfolio tolerances for greater liquidity.

'It's your money' versus lockup

Anyone sitting in the ivory tower of a well-paid job and a paid-off mortgage during the pandemic should not judge the struggler who withdraws their super to pay the rent, feed the family or fix the car.

Unfortunately, it is the people with the least in super who are less financially literate who will be left with less in retirement savings. Where the money is used for short-term wants rather than needs, they are doing themselves a disservice. Even if in future they are likely to qualify for the age pension, they should supplement reliance on government support with other assets while drawing a pension. And nobody knows how generous or otherwise the age pension will be 20 or 30 years from now.

Compulsion and tax advantages are usually necessary to make people save for retirement, and Australia has a system recognised as a role model around the world. It included highly-restricted access before retirement, and there will be other crises in coming years where super might be opened again.

Ideally, the Government could have recognised the genuinely needy during the pandemic and set up another scheme to assist them without invading their super. "It's your money" flies in the face of the strict access rules we have accepted since 1992, and many are compromising their future in exchange for current consumption.

 

Graham Hand is Managing Editor of Firstlinks.

 

37 Comments
Monty
September 01, 2020

The Coalition has finally woken up to the sleight of hand pulled on them by Keating and Kelty. Industry super funds finance the Unions, saving them from the increasing irrelevance they face as member numbers decline.
The Unions, in turn, fund the Labor party.
Fund managers are happy to spruik the essential nature of compulsory superannuation - of course they are, billions of dollars of fees flow into those pin-striped pockets! I have run my SMSF for 20 years and am very happy with the results - good returns and minimal fees.
I

Rob Wilson
August 23, 2020

And there it is: " in order to protect one man’s legacy".
Hume's own words.....
The problem with Liberals and superanuation is simple - it was Paul Keating's policy.
There's no rational economic reason to oppose super - it's ideological tribalism at its most base.
At a time money is being printed "willy nilly" and Josh is outspending drunken sailors, a means-tested direct payment to Australians would be more sensible.
Liberals seem to be grasping at every policy straw to rationalize their existance now we'll never see a surplus budget in our lifetimes - that strawman is dead and buried!

Jeff Oughton
August 23, 2020

A third, second or....best policy in a lives and livelihoods crisis - depending on your financial position.
One in five households have on average $300 in cash savings; almost 10% have less than $100. When they lose their job or incomes are reduced in a sustained crisis, these households need govt support/dissaving or dissavings/ withdrawls from their super today and the foreseeable future. For many low income Australians, superannuation for retirement income later is not tax effective in normal times and should not be compulsory; the after tax income should be used to live on today and the aged pension awaits with inherent risks. Other Aussies choose to use to buy rather than rent and start to save in their home today.

Chris
August 22, 2020

The real surprise is that before 2020, trying to get access to your super was nigh-on impossible if you had lost your job etc. and pretty much the only way you qualified was if you were terminally ill.

On Triple M the other day, they did a phone-in and people said that all they had to do was literally "to fill in their TFN, super fund number, their name, D.O.B. etc. and then make a self-declaration that "their income had dropped", no quotient, just that it had been affected as a result of COVID". It was that easy. What an absolute joke, compared to beforehand.

The Government is doing this because it obviously has a vested interest. If you are self-sufficient in retirement, you don't need them as much, but if you are dependent on them because you have a lower super balance and can't retire or in the manner you wanted, they'll promise you the earth...just as long as you vote for them. Yes, it's a fine balance between paying out pensions for people versus remaining relevant, but the best thing is that you can just borrow more, print more money and kick the can down the round when it comes to the 'paying it back' bit.

MF
August 21, 2020

Any chance of hearing what Paul Keating had to say apart from "willy nilly".

Graham Hand
August 21, 2020

Hi MF,

The article quotes far more from Mr Keating than ‘willy-nilly’, and while I cannot source the ISA video, there is this:

https://www.facebook.com/watch/?v=2152565224853593

AlanB
August 21, 2020

Keating and Hume are both right, and both wrong. Yes, accessing super savings early will reduce future security and yes, people need to draw on their own savings in an emergency. However, they miss the point that early access to super has been necessitated by governments over reacting to a flu-like virus and effectively shutting down the economy. Border closures, travel restrictions, customer limits etc were imposed upon us by federal and state governments and have caused a massive rise in unemployment, social disruptions, stripping of civil liberties and a massive budget blowout. The more rational and humane strategy would be to treat Covid as any other type of flu-like virus and treat people with respect, compassion and professional medical care when needed. Most deaths have been in nursing homes of those close to death in their 80s and 90s and undoubtedly many people here and overseas died with the virus and not from the virus, distorting the death rate and the government's response.

John
August 20, 2020

When deciding whether to accept AlphaBeta’s figures and projections in this article, keep in mind that until Accenture bought the company in February, it was owned by Kevin Rudd’s chief economist, who remains the effective head.

Jack
August 20, 2020

In 1981, I changed jobs, and according to the rules at the time, all my super balance was paid out in cash. That super cheque allowed a larger deposit on a larger home. For the next 35 years we did not need to move house as the family needs changed and it also meant a better sale price when we retired and downsized. From a property point of view, early access to super, proved a godsend because we were able to enjoy a better property for our whole working life. BUT when it came to retirement savings, there was a price to pay. My super balance at retirement would have been significantly lower than my peers, who had had the benefit of those early years of employer and personal contributions, if I had not made extra salary sacrifice contributions to supplement my retirement savings. And without the benefit of compounding, that required some hefty sacrifices. By then, with adult children and a higher salary, that seemed easier to do than servicing a big mortgage with a young family. The question is whether the young people accessing their super today will have the same discipline to increase their super contributions in later life, or will those lost contributions be lost forever. Maybe we should encourage older people with fewer family responsibilities and more resources to add to their super when their retirement comes into sharper focus.

Paul
August 20, 2020

Does naming a NRL stadium after your industry superannuation fund satisfy the sole purpose test? Just asking.

Chris
August 22, 2020

No, but it certainly costs the members for the pleasure of doing so. Money well spent ? I wouldn't think so. That money is invested for the benefit of members - the word is TRUSTee, not to show how great your company is. If they cared about members money, build a stadium or other such piece of infrastructure, then lease it and charge someone else accordingly for the naming rights. Cart, horse, before.

Bronte
August 20, 2020

It is clear to me that this scheme is a huge mistake and one of the worst things the government could have done. The writer is completely correct in saying that the government should have stepped in and helped those in the greatest need instead of pushing the can down the road and allowing people to erode super now, just so they can go on the pension when they retire. The whole point of compulsory super was to take the choice away from people: so they would be forced to prioritise future wealth over immediate consumption. And this in turn took burden off future government spending. What a joke it is to have allowed people to access their super early. Sorry Hume, Keating is right here.

Paul
August 21, 2020

"just so they can go on the pension when they retire." So who wants to work until 67 (or later in the future) and live off the pension? Problem is that wages are being garnisheed by 9% with only a few understanding the system or taking any real interest in it until it's too late - just what the funds (industry and retail alike) want in order to skim millions off the top. Education is desperately required so people can make considered decisions.

James
August 22, 2020

Most people won’t have enough superannuation on retirement (unless they put in a lot more themselves) to not need a part or full pension at some stage anyway!

Maybe we should all get 15%+ super input like the politicians and public servants eh?

Constant tinkering, taxes, exorbitant fees, lack of definitive purpose and the threat of more changes makes superannuation a ridiculous joke!

Chris
August 22, 2020

Unfortunately James, the only public servants who will get the gold standard pensions are the top brass of Army, judges, police etc. The rank and file public servants do not get anywhere near that, at least at State level. Federal APS staff maybe, but if you want to see who gets 17%, then try the university staff !

Marcia
August 23, 2020


If only the Howard/Costello led Government had put the income from the mining boom into a capital protected Future Fund, rather than squandering it on "boomtime" funded tax benefits, such as abolishing the 15% tax on superannuation payments in retirement, & refunding franking credits to untaxed superannuation in pension mode, that have persisted past the boom, the the Government would have been able to fund support to those in distress due to COVID 19, rather than undermining the tax advantaged superannuation system.

Oh, and what will the taxation implications be for those who have taken advantage of the early access to their super?

Ken Ellis
August 20, 2020

If the scheme is so good why do we have the vast majority of people still claiming part or full time pensions after 30 years? What amount as a percentage do the managers of these pension schemes take from the workers contributions?

Aussie HIFIRE
August 20, 2020

There seems to have been a lot of criticism of the government and the ATO for not making it harder to withdraw the money, but what was the alternative if they were going to allow early access to super? Try to read through 2.6 million applications for early release of super and get them processed ASAP? Haha be serious. It had to rely on people self certifying whether or not they were eligible for early release of super because otherwise it wouldn't be practical and would be subject to the discretion of whoever processed the application. It's entirely unsurprising that some people deliberately lied, in the same way that it's entirely unsurprising that some people are going to break quarantine etc. Would we have preferred that it instead took weeks or months worth of delay for people to be able to access their super?

Another issue is that a lot of people who used the Covid early release of super scheme would potentially have been able to use the existing hardship provisions within super, so it's not as though it's a huge stretch from the usual set of rules.

Randall
August 20, 2020

I think that the initiative may well have a longer term negative impact on popular support for superannuation in general. Already I do not believe that most Australians really understand that superannuation outcomes are unequal due to design of the system itself. So post retirement we are heading to a very different world from that where the age pension dominated for most. Now with large numbers of voters either emptying their balances and/or reducing their final potential outcomes we may have less voters with self interest in any of the future proposed super changes when they inevitably come along.

Andrew
August 21, 2020

Randall's comment is the most pertinent for readers here. If the 'average' person has no stake (literally) in super, then for those with more inside Super, there will be less people around to protest when the next rule change is proposed for Super (later access ? partial nationalisation/expropriation ?)

Tony
August 20, 2020

As the Minister for Superannuation, Hume is responsible for promoting and defending the system, not encouraging the pillage of balances with no checks. Just another LNP Minister attacking the system they hate.

Norma
August 20, 2020

As there is no restrictions on drawing out all your super when age makes you eligible to do so, and from personal observations and conversations this seems to be very much the case and this money then spent on cruises, families whatever, followed by then claiming the full pension, the supposed idea of this saving the govt paying pensions seems to be a complete nonsense. What a bonanza this has given the Union funds, Wealth Funds, Banks to all skim off their bit of "your "funds. Jack is correct that to young people -old age is a long long way off. Maybe we should give the people drawing on their super the belief that they know what they are doing, after all , if not, it is to their detriment.

Gary M
August 20, 2020

Surely there's a difference between someone drawing out their super at 30 or drawing it at 60. Yes, in both cases, they no longer have any super and might qualify for the pension, but the 60yo has benefitted from 30 years of compounding to help set them up for retirement, even if they still draw a pension.

Paul Coghlan
August 20, 2020

Money has a time value. Ask the typical punter if they would like dollar now or in thirty years time. The instinct of course is to grab the dollar now rather than do a considered analysis of how much it would be worth thirty years down the track. Interest is after all the reward for foregoing present consumption. Much of the evidence suggests that the early withdrawals have been to satisfy present day discretionary expenditure. So don’t be surprised if this cohort has their collective hands out looking for a government funded pension at retirement age. By the way, they had better hope that there are enough tax paying income earners to fund a reasonable retirement for them.

Rob
August 20, 2020

Graham

Think you have missed the key "unspoken" point. By allowing early access to Super savings, the Govt can reduce the amount of support it is pouring into the economy by $42b - $30b if you like, but it is very significant and reduces new Govt debt. It is not sold that way by Jane, or acknowledged by Paul

It is of course true, by taking it out now, you have compromised the future, but there are plenty of other "loopholes" such as 100% withdrawal in retirement. Uncomfortable truth, but fair chance that a good proportion of those withdrawing Super early now, will be exactly the same people who will be dependent on the Aged Pension.

Short haul, the Govt has reduced the "Pandemic Debt Load" and a 2040 Govt can deal with the consequences!

SJ
August 20, 2020

The article really highlights the gravity of the actions and policy. I cannot imagine any consulting financial experts or policy advisers who did not warn the current government of the major impacts it would have to future generations. Nor can I imagine the government asking the public to ‘self-assess’ medical conditions to understand whether a certain type of medication is right or wrong for them, in the same way they have asked them to ‘self-assess’ their financial circumstances.

Thank you again for a great read that was backed with some pretty alarming figures.

Susan
August 20, 2020

The stimulus spending graph contains few surprises, reflecting most people being reasonably prudent in this unpredictable time.
It would be interesting to see a longterm financial comparison for the Nation as a whole, between
a)workers using their estimated $42 billion of super funds to make their own decisions to stabilise, survive, or improve their current security and financial situation
versus
b)indiscriminate government largesse adding that extra $42 billion to its existing and mounting debt pile for the next 40 years.
Both will stimulate the economy now but the debt trap and subsequent taxation will differ.
The world will have established a whole new paradigm of living by the time current 30-yo workers become retirees at 70.

Sean
August 20, 2020

Interestingly, the comments refer to the ATO referring to the SIS Act. However, the ATO is not following the SIS Regs when sending out the determinations to the superannuation funds.

The SIS Regs quite clearly state that the ATO's determinations regarding the compassionate grounds conditions of release must include the amount of preserved and restricted non-preserved that may be released. The ATO's determinations do not include this information for the "standard" compassionate grounds and the COVID-19 compassionate grounds conditions of release.

Therefore, for the superannuation funds to comply with the SIS Regs they should be paying all compassionate grounds condition of release amounts in the order of unrestricted non-preserved, restricted non-preserved, preserved.

Thus, some members may be receiving money from their superannuation funds that they already have access to. Further, this has been going on since the ATO took over the compassionate grounds condition of release on 1 July 2018.

Craig
August 20, 2020

Putting the idea into the minds of members that their super is not theirs will only further increase already high levels of disengagement. Super does belong to a member - its vested in their name subject to conditions, ie the conditions of release. The trade off is you get tax concessions in return for those access restrictions.

On the flip side - maybe this measure could end up engaging a lot more members with their super as they become acutely aware that they have raided the piggy bank and the damage needs to be repaired.



Martin Lenard
August 20, 2020

The early release program is a purely partisan political decision that achieves two goals:
- saves the government $42B in assistance to the less financially literate (who generally don't vote Liberal)
- whacks union-affiliated industry super funds and provides a competitive advantage to underperforming for-profit retail funds.

Geoff
August 20, 2020

Industry funds don't generally have to worry about liquidity because the industrial relations system guarantees constant inflows through legislated default super arrangements. And just because $X was withdrawn from this scheme doesn't automatically create a government liability for the same amount - and why should it? Where's the "I am an adult and will take some measure of responsibility for anything that happens to me" thinking? Anyone who withdrew their super is in some ways rolling the dice on the OAP being available when they retire. Big call, given what we know about the demographics, in my book. And "- whacks union-affiliated industry super funds and provides a competitive advantage to underperforming for-profit retail funds." Could also be phrased as "levelling the playing field".

John
August 20, 2020

What this analysis forgets is the time value of money. it treats a dollar today as having the same value as a dollar in 30 years. Yes, taking out $20,000 today will cost a 30 year old $50,000 at retirement, but how much would that $50,000 buy?

Just think about what you could buy with $20,000 25-35 years ago, compared to what you can buy with $20,000 today.

To illustrate, I built a 3 bedroom house in 1983 for $41,500. How much would it cost today (37 years later) for the same standard of house?

So, the $50,000 loss in superannuation balances that a 30 year old suffers to his retirement balance has nothing like the spending power that our mind thinks that it will

Graham Hand
August 20, 2020

Thanks John but your comment is not correct. The numbers are after allowing for inflation. It is real growth in the amount based on investment returns.

Peter Ellis
August 20, 2020

The salary or wage level earned is a big determinant of the superannuation balance ultimately used to fully fund an aged based pension. In the main, those earning lower level salaries & wages without prospects for higher level positions (minus inheritances, etc) will need to rely on some government pension. The early release scheme identifies this fact and the immediate needs of the masses to have access to 'their money' to pay for essentials. Naturally, the 'vested interest groups' will postulate the stupidity of the scheme as being detrimental to the recipients future welfare, in order to hide the reality of their own firms reduced fee income!

Jack
August 20, 2020

It's almost impossible for a 30-yo to imagine themselves at 60, running out of money and sitting at a desk in Centrelink hoping the assistant will approve their pension claim.

Chris
August 22, 2020

If there even IS a pension around when they get to that point, something that Mssrs Coates and Cowgill didn't quite grasp last week. Because "that's what you had superannuation for", will be the response !

John
September 03, 2020

In 30 years time, there will still be an aged pension, but it's more likely to take the form of a fully taxable universal pension for all around age 70, with no means test. This will enable thousands of expensive Centrelink staff and their equipment, office space and greenhouse gas emissions to be dispensed with, as they would no longer have a job to do assessing assets and income.

 

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Superannuation

In fact, most people have no super when they die

Contrary to the popular belief supported by the 'fact base' of the Retirement Income Review, four in every five Australians aged 60 and over have no super in the period up to four years before their death.

Investment strategies

The risk-return tradeoff: What’s the right asset mix for a 5% return?

Conservative investors are forced to choose between protecting capital and accepting lower income while drawing down capital to maintain living standards or taking additional risk. How can you strike a balance?

Investment strategies

Mind the bond/equity rebalancing gap

The 12 months ending 31 March 2021 saw the largest positive divergence in returns between global equities and bonds in nearly 50 years. To retain a target balance, investors need to sell equities and buy bonds.

Investment strategies

Do bonds still offer a buffer to equity volatility?

Most Australians place their superannuation into a balanced fund, making the relationship between bonds and equities a vital part of performance. Does the traditional correlation between shares and bonds still hold? 

Strategy

Five trends shaping investments in China: 2021 and beyond

Australia has its tensions with China but with a strong base and a competitive, well-educated workforce, China’s manufacturing champions will advance its technology prowess and gain global market share.

Investment strategies

The fascinating bank hybrid journey of the last year

Bank hybrids produced excellent returns in the last year and the biggest lesson from March 2020 is that many investors don’t understand the structures, and in a crisis, they panic first and think later.

Shares

Eight quick lessons on the intricacies of selling shares

When we think about investing, we think about buying. The intricacies of the selling decisions are frequently overlooked, and poor selling is correlated to a lack of conviction. Selling is as important as buying.

Sponsors

Alliances

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