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Unexpected results in our retirement income survey

It is difficult to design a survey without some preconceived idea of what the answers might be, and it’s a welcome surprise when prior assumptions are challenged. It was certainly the case here.

I feel honoured that so many of you shared your personal views on death, retirement and spending.

Our Survey received almost 1,200 responses which is probably the largest sample on this subject since the two papers on retirement income were issued by Treasury. The Survey results have been sent to the Government and hopefully it is valuable input to policy decisions.

We also received well over 1,000 comments which is obviously too much to include in an article.

The comments are attached here in full and largely unedited (warning, we have removed a few unsavoury words and personal identifiers but some may have slipped through).

I encourage you to scan the comments. They are as important as the overall results and many were passionate, considered and heartfelt. Millions of Australians live on their super and policy determines the quality of their lives.

For background, two previous articles are here and here and the Survey is now closed.

Here are some highlights:

Q1 The definition of retirement income should be:

This was the first surprise. The question allowed readers to cumulatively add to the previous category. Based on past comments received in Firstlinks, I expected far more people to say that retirement income should comprise only pensions (where eligible) and superannuation (both income and capital). These items are widely accepted as sources of retirement funding but the sum of the three was only about 42%.

A further 34% of people accept that retirement income includes withdrawals from non-super assets, and again surprisingly, a solid 24% more accepted the need for reverse mortgages (or similar) on homes. 

My interpretation of these results is the Government has more support for its definition of retirement income than I expected. Most people accept it should include drawing widely on assets held during retirement, not only super. This should give the Government more confidence pushing ahead with its broad definition.

It also shows support for equity-release schemes (although a later question suggests not for own use). The Government should improve the Pension Loan Scheme, especially the punitive interest rate of 4.5%.

Here are some sample comments:

"I do not accept the right of Government to apply conditions to how I spend my own 'all taxes paid' wealth. I grudgingly accept the Government may have some moral right to applying conditions to how I spend a Government Pension or wealth earned under Super tax concessional rules."

"With the taxpayer-subsidised boom in assets values of property, it is absurd not to include that stored value in any consideration of lifestyle sustainability."

"To regard as income the withdrawal of your own life savings from the cookie jar, the bank or under the bed just defies logic."

Q2 What proportion of your superannuation held at retirement do you expect to remain when you die?

Another surprise, I did not expect such an even distribution. Only 18% of respondents expect over 80% of their super to be left over on death and 28% expect to have 20% or less. That shows significant expectation to spend the majority of super in retirement, with nearly half at 40% or less.

Q3 What proportion of your total assets (including super, home and non-super) held at retirement do you expect to remain when you die?

The table below contrasts the results for super remaining before death (blue bars) versus all assets remaining (orange bars). This tests the claim that "... retirees die with around 90% of the assets they had at retirement." (Retirement Income Review). It shows most people (28.2%+26.7%=54.9%) expect over 60% of their assets at retirement to remain at death. Less than 20% expect to have only 40% of assets remaining compared with nearly half of super alone.

It's logical and expected that people generally accept super is for spending in retirement but less of their total assets will be consumed.

"I have an ethical preference to minimise consumption, and leave as much as possible to charity. While there is still so much poverty in the world, it seems not right that the well-off among the world live to maximise their own consumption."

"I expect at least that my home, unmortgaged and my super, will remain to support my wife and kids. It is not reasonable to expect to use up everything before one dies. The money all goes around anyway."

Q4 Would you spend more in retirement if you knew you would never run out of money?

Our previous article quoted research that people would spend more if they knew their money would never run out, and it is one reason the Government is encouraging the development of retirement income products. Again, these results will encourage the Government. About 59% would spend more which confirms their view that some people are living frugally as they are unsure how long their savings will last.

Some respondents thought this was a silly question, assuming that of course people would spend more if they knew they would never run out of money. But that is assuming a certain type of behaviour. Plenty of retirees have enough income to live on and do not want to spend more, while many will leave money to their kids. The question is not intended to test whether people would rush out to buy a Ferrari and take a first-class world cruise if they knew they would not run out of money.

"I spend what I need to spend and that should be sufficient for the government, leave me alone let me die in peace when it is my time and what is left can be used by my offspring."

"I’m too old to get much pleasure from big spending. I am fortunate in being able to spend what I want; but I am not extravagant, and expect to die with more assets than I have now.(I am 85 yo)."

"I doubt if I will run out of money. I could spend more but want to leave something for my children. I believe my children will have less than I have. They may not all own a house."

"Have saved all my life and wouldn't be able to change if it's within my power."

"My income is more than enough to cover my expenses."

"We come from humble beginnings, so v expensive cars, boats are not us - so there is no means to actually spend more if wise investments keep accumulating. Its then up to the next generation(s) to be wise or spend or have a balance."That's a no-brainer!! Seriously I probably would not. I have lived a comfortable but value focussed life & that will not change. I buy what I want, travel where I want & what is left each year I give to the kids!"

"I am happy with my life, why spend more than I need to. Spending more does not buy more happiness."

Q5 If someone is 60 years old with a life expectancy of 90, what is a safe annual withdrawal rate to never run out of retirement savings?

Safe withdrawal rates are hotly debated in the industry and academia, but the most popular in this survey was in the range of 4.1% and 6%. Of course, there are many assumptions in this question and we left it very broad. The sum of responses over 4.1% was 51% so there is a fair amount of optimism that growth assets will continue to deliver, because money would run out over 30 years if invested in term deposits at 1%.

"The government has only itself to blame. In today's zero-interest-rate environment, where you can't safely earn enough to keep pace with inflation, you can hardly blame pensioners for being overly cautious about spending and drawing down their assets."

"Don't care, the strategy of focusing on income in a combination of age pension and dividends plus franking to provide all my required spending without capital withdrawal is a far better option."

Q6 How will you generate money to live on after age 65? (multiple answers allowed)

The most obvious and popular answer which scored 80% is drawing down on super and non-super, and reflecting the wealthier people who read Firstlinks, only 19% expect to go on the age pension. Our audience also expects little use of reverse mortgages for themselves (although in question 1, they supported others using reverse mortgages). Half of respondents indicate a switch from term deposits (and similar) to equities to generate income.

"I'd work if a suitable job could be found."

"Already retired - having to move up the risk curve significantly to retain income. Almost no TD's now."

"I'm ex fund manager, ex VC/PE so we tend to get higher returns, the key being not to be a slave time wise to finding or helping such investments."

Q7 Which of the following might you use in selecting your retirement strategy, if they offered good functionality? (multiple answers allowed)

Many different products are likely to be used as people plan their retirement strategies, although less than 30% of responses nominated full-service advice if the cost was about 1% of the asset value (which is a typical level). Cheaper digital advice gained similar support. The most appealing choices were online calculators and comparison tools at over 40% each, and a decent 21% would consider a product recommendation from their super fund.

"Have learnt to invest through self education."

"My own bloody spread sheet!!"

"Full service advice at a fixed fee rather than a percentage. Like going to a lawyer or accountant. You pay for what you need when you need it. The best step that could be made in the interest of consumers is to stop the annual fee on a percentage of funds service or at least develop the alternative mentioned above."

"I like to invest directly in equity (with diversification) and do so through an online broker. Since my goal is to leave as much of my wealth as possible to charity, I have an investment horizon that extends beyond my own life time."

Q8 Do you plan to leave an amount available to buy a place in an aged-care facility?

This response was also higher than I expected, indicating that a reason many people live less lavishly than their resources seem to allow is the uncertainty of the final cost of an aged care place. A strong 44% of respondents plan to leave an amount aside and only 24% will not, although the undecided is a high 33%. Many of the comments on this question were highly personal.

"I hope for the fate like my mother. Wake up in the morning take five paces and drop dead."
"An important question. Recent experience with relatives indicates a lump sum of $500 K to $1Mill to secure a good to high standard of care. This is a very substantial amount for most."

Q9 Any other comments on retirement income, intergenerational inequity, superannuation policies, etc?

With over 400 comments on this question alone, it is impossible to do them justice here. See the attached paper for a full list, lots of great ideas.

Thanks to everyone who participated.


Graham Hand is Managing Editor of Firstlinks. The Reader Survey was open from 5 August to 12 August 2021.


Bob Baker
August 28, 2021

Superfund Inheritance. It appears that some folk are getting a tad concerned about folks who have large amounts in their Super and want to leave it there as an inheritance for their kids, etc. and said supposed servants are trying to figure out ways to force folk to spend it now without perhaps considering the possible ongoing effect on the Australian investment economy in the future if the amount in Super is significantly decreased.

The Gov’t has a scheme whereby folk that “downsize” their home can transfer $300K to their Super account which is how I arrived at that as a target amount in the following.

My impression is that the total funds in Super actually constitutes a significant investment force in the Australian economy, especially for infrastructure so we probably don’t really want to shift too much out of that area, and, of course letting it go through the “inheritance” process means that first you have die. This approach also does take money out of the Super investment system, as would any scheme forcing folk to withdraw it from their Super. Then, of course there are whatever “rules” apply to how inheritances are executed (how many wills have been overturned) and the complicated associated taxation system in this area.

My proposal is that we institute a system whereby folk can transfer “excess” Super on to the next generation by being allowed to transfer up to a maximum of, say, $300K to the Super account of a would be inheritor (beneficiary). This $300K may be transferred as several “contributions” over one or more years, but the total amount transferable to any beneficiary would be limited to that $300K maximum for that beneficiary.

The obvious advantages: 1. The money stays in the Super investment system and hopefully remains invested in the Australian economy. 2. The beneficiaries can’t touch it till they retire. 3. There is a high probability that the boost to their super will result in the “poor” beneficiaries becoming “independent retirees” with minimum dependence on Gov’t retirement system allowances, (more “poor independent retirees”).

The first problem is to draw up a set of rules that define an acceptable “donor”. 1. Ideally a donor would already be classified as an “independent retiree”, that is they are retired and have a source of income that will see them living comfortably into say, their mid nineties or beyond with no government payments. (Not sure how folk who live on “dividend” and investment income will fit within the system). 2. Ideally they should own their own home. 3. Their super fund should be in a fund vetted as a reliable fund by APRA and unlikely to go bankrupt in the foreseeable future, so maybe not an SMSF. 4. Not sure whether you can extend this “redistribution of Super funds” to let persons not yet retired be donors, although I suppose if they are old enough to be retired but have chosen to continue working then letting them be “donors” seems reasonable. 5. Likewise there may be some folk who find themselves with too much Super while still relatively young, they would obviously have to be assessed on a case by case basis.

The next thing is to define a beneficiary and perhaps, more specifically, their relationship to the donor. 1. The first acceptable “beneficiary” would be the donor’s partner/spouse or equivalent. This is prompted by the reported inequality between the sexes in Super holdings and since any inheritance would likely first stay within the “partnership” then “balancing the books” seems an acceptable reason to transfer funds so that whichever partner lives longest still has the benefits of a reasonable amount in their Super. Other beneficiaries might be 2. biological children of the donor whether from the current partnership or from a previous relationship. 3. biological children of the donors’ current partner whether from the current partnership or from a previous relationship (e.g. the wife’s kids from a previous relationship even though they have no direct biological relationship to the donor). 4. Adopted or fostered children who lived with the donor for a reasonable time in a parental/family relationship. As you can see, given the current variety of definitions of “family relationship” it could get pretty complicated so someone may have to review submissions on a case by case basis when an application to transfer Super funds is submitted.

I am not sure whether we want to complicate the system by also including some “recovery” provision where, if things go wrong for the donor, the beneficiary can help them out by transferring part of the funds back, possibly as a monthly payment, but given the funds are held in the beneficiaries Super fund I’m not sure if that would be possible.

Finally, if the donor’s Super is still in “accumulation” mode, any action under this scheme should not change that status. So, I’m hoping this could lead to a discussion on “spreading the inheritance” without the necessity for someone to die first and yet keep said wealth in a system where it will continue to hopefully be invested in, and benefit, the Australian economy, assuming we agree that is a by-product of the current superannuation system.

Also, once something like this is put in place, those “servants to the public” charged with doing the actual work can probably “work from home” which could be seen as a covid friendly outcome, they might even be located around country Australia with just occasional actual physical meetings in some Canberra office which would obviously help the rural economy.

Anyways, as I said at the beginning, just a few thoughts that could start a discussion on one possible improvement in the Superannuation system.

August 25, 2021

Retirees who complain about the government plundering retirees' life savings, especially the retiree cited in this article's 'sample comments', who says it "...defies logic.", need to understand that the government is no different to the famous American bank robber, Willie Sutton who not only robbed many banks but was apprehended many times and spent many years behind bars. When asked as to why he kept robbing banks knowing he'd likely be imprisoned at length yet again, Willie simply said with a sigh: "Because that's where the money is!"

August 22, 2021

I remain stunned with the government's generosity - or was it vote buying? - in allowing the growth in pensions to be tax free. I'm almost 75, and have been retired for 18 years. In that time, I have grown our pension fund by $2.5m., withdrawing 53% - $1.3m, and saving 47% - $1.2m. All of this largess with no tax!!. The no tax certainly has been a spur to me being a student of the share markets. I work very hard at it, and enjoy it. We hope to never have to go into a nursing home. When some retirees say that they are not assisted by the government, they should think about how fortunate they are.

August 19, 2021

It is interesting to note that in considering the retirement income staring from income withdrawals, over 75% (cumulative) accept a form of capital withdrawals while opposed to the reverse mortgage component.

However, 81.1% - Q3 (cumulative) want at least 41% of their assets at death. It would seem that many participants do not understand the effect of capital withdrawals, its sequencing and its capability of undermining the amount of assets left at death. These two replies seem incongruous.

I would suggest the driving concern is the amount of assets left at death. These understandings should be further investigated in future surveys.

August 18, 2021

Firstlinks readers seem to be more financial savvier than other retirees. Hence in the survey there is a more independent financing retirement than relying on the pension -- supposedly 63% of the retirees depend on pensions (full and part).

John M
August 15, 2021

Contributing to the survey was a worthwhile exercise as it continued to force me to think through how I would fund my/my partners' retirement and manage the inherent risks involved. Unfortunately, I completed the survey on my phone which led to me missing some of the important introductory information. As such with regard to Q1 I went with option 4 (all of the above including withdrawals etc). My answer was based on how we will manage our retirement particularly following the government caps on super balances. In hind sight as with many other respondents I do not want the government including any more than the first two options and perhaps begrudgingly the first three. As many respondents note, once the the definition is defined it won't be long before the government comes along and adds taxes and caps based on total retirement assets and income. I wonder if this mistake (answering how we would fund our retirement NOT how it should be defined) led to the larger than expected number of respondents opting for option 4 and 5. If I did it over, I would answer option 3 - because I do not trust what the government will do with SMSF and self funded retirement in the future.

ken Scott
August 19, 2021

agree. I answered on what I considered not what I wanted the government to consider.

Joshua Funder
August 13, 2021


it was great to see the results of your Retirement Income Survey to show the sophistication of retirees in approaching retirement funding and housing.

I'd take up two issues.

First, like DSS, the Retirement Income Review and Retirement Income Covenant, the survey was focused on Income. We find that to live well over decades in retirement, senior Australians need access to both income and capital. It is difficult to get credit from banks in retirement and you can't fund lung transplants, new kitchens or pay off the mortgage (among many other capital expenses Household Capital funds) on the pension or without depleting superannuation accounts. We use the term Retirement Funding to cover the financial needs without undue focus on the pension or annuities alone.

Second, your refrain that the PLS is overpriced is not fair. The PLS is a reverse mortgage without the full protections imposed by responsible lending. The margin of the reverse mortgage interest rates over cost of capital is consistent with home loans (because reverse mortgages do not pay monthly interest and provide a series of statutory guarantees, the cost of capital will always be significantly higher). The RBA rate is almost zero, yet most home loans are north of 3% but we have not seen claims the federal government should nationalise the banks or have the RBA enter the home loan market with retail loans at 0.1%!

Jeff O
August 15, 2021

The govt entry into the home equity release (private home savings) market via a very vanilla simple reverse mortgage paying a weekly private pension/annuity recognises that there are a number of private market failures - both in terms of product, advice and consumer behaviours - it is far from a "competitive" market for older Australians. A number of shadow banks provide capital release products attracting super profits. As for the govt PLS income offering, there is no (actual) credit risk on an owner -occupied loan with a loan to valuation ratio of 15% and capitalised interest. Currently, the govt's cost of variable funds for the PLS is 10 basis points plus some "sunk" operating costs at Centrelink equals a lot less than 4.5% - albeit better than the private offers at 5% plus for income based offerings. And the govt can also borrow for 30 years at about 1.5%. So the PLS offering at an interest rate of 4.5% is very very profitable for Australian taxpayers. The loan rate should be much lower. This would also boost the income and spending of older Australians and help to create jobs for younger Australians. And for the record, the RBA does collect and release data - see Statistical table F6 - on new home loans for owner occupiers with LVRs of less than 80% etc . The current rate is 2.4%..far less than 3%. That's a competitive market, with the banks making a return on capital in excess of 15%!. There is no need for govt entry or to nationalise the banks! Australians with a home mortgage just need to shop around; and hopefully open banking and the entry of low cost fintechs will help with that!

August 13, 2021

Income is generated from business, investment or employment activities. If a cash withdraw from non-super assets is included as "income" for retirees, it should be included as "income" for employees too?

We are still many years from the official retirement age but have only investment income. We have very little super due to overseas employment. Would the new rules ( if implemented) mean every dollar I withdraw to pay the school fees will be defined as "income"?

August 13, 2021

I was just thinking, when all my kids are at high school and universities, our cashflow could well be negative, and yet we would be deemed high income earners due to cash withdraw? How absurd.

Maybe the proposed "income" definition would only apply to those have reached the retirement age. However, given the high house prices, it is likely that retirees would need to withdraw large sums of cash to help their kids buy homes. Would they become high income earners?

I do think that there should be a cap put on the family home and even if the cap was based on Sydney house prices, say $5m it would be fairer than not having a cap.

August 12, 2021

What would be helpful would be for the existing rules to be fixed and "grand-fathered" [like the Capital Gains Tax was handled previously] so that "we" retirees could have some peace and stability and not have to continually revise, update and adapt, simply to comply with some new bureaucratic-Utopian-ideal of what is BEST for "us"!! [Read that "Utopian-ideal" as " bloody nightmare" please ]. If each new cohort retirees was lumbered with a new set of hoops to jumpt through then that would become their problem, and they would have to handle them and adapt like "us" before them. 

August 19, 2021

I agree Trevor - existing rules should be grandfathered - not changed anyhow like the assets test in 2016 - take it, leave it or wear it attitude, which was ok for Turnbull and O"Dwyer on luxury pensions etc but not the average retiree with limited super etc - it buggered my retirement plans

August 12, 2021

Most comments reflect the age or demographic of respondents. One needs to remember the purpose of superannuation is to reduce government spending on pensions.
No thinking person could support removal of franking credits i.e double taxation. If the govt. got that through lookout for what comes next. Employers taxing wages then employees paying tax again when they receive them?
Franking credits are for all investors not just retirees. If they were taken only from retirees, it would be discrimination. No one should be penalized for living frugally, self educating in finance or supporting Australian businesses.
If you live in a multi million dollar house - well done, but if you live in a multi million dollar house and receive a pension or buy one to receive the pension you should be forced into a reverse mortgage above a certain threshold.

Martin Tone
August 12, 2021

It seems Jeff in Brisbane fell for Morrison's lie that franking credits were going to be removed for everyone. The policy was to allow franking credits to be used by people PAYING tax. Retirees don't pay tax and so they were not going to able to claim any franking credits attached to dividends. People on pensions before a certain date were exempt. Changing to your investments to those that issue unfranked dividends , ie 7% unfranked dividends instead of 4.5% fully franked, means you would still basically get the same amount. Morrison did this to support very wealthy people in their retirement. Dick Smith thinks the policy is unfair as he got $1.6 million in dividends so the government gave him another $500,000 [ which he gives away ] so he can survive in retirement. Better to spend this money on future pensioners who don't own a house and very little super.

August 12, 2021

Martin, if the policy had not included exempting franking credit refunds to unions (who pay no tax) and retail and industry funds (where refunds due to retired members are sucked away from them to pay for accumulation members tax liabilities) there might have been a little more acceptance of that proposed punitive tax policy.

August 12, 2021

AV, your comment regarding how industry funds use the tax credits received for their members in retirement is not correct, based on my experience as a former investment executive with one of the large Melbourne based industry funds. My fund definitely passed through the value of the franking credits that were attributable to our retired members, despite the fact that the superannuation and retirement investments were pooled. This just required an identification and attribution process to be undertaken by my investment operations team. The other major Melbourne-based industry funds did likewise, based on my understanding of their approaches.
I do not disagree with your argument that there should have been no difference between the treatment of the franking credits for all non-tax paying recipients.
I can't speak with definitive knowledge for the retail funds, however, the retail funds generally do not pool super and retirement assets, therefore I do not see how they can 'suck them away' to reduce the tax liability of their super members, without very clearly being in breach of fiduciary duties.

August 16, 2021

AV asking pensioners, with nothing but the ownership of the roof over their head, to fund their retirement by eating away the value of their home is simply a pensioner's tax, retirement tax and a death and inheritance tax that is imposed before death. This is certainly a punitive tax policy. So much for have a go get a go. Another policy designed to widen the wealth gap and protect the wealth of the very wealthy will attacking middle class retirees.

August 12, 2021

You say retirees don’t pay tax so shouldn’t get franking credits. The fact is that tax is paid on their behalf by the company. Paul Keating first recognised this principle , and subsequently John Howard , using the same principle , allowed cash refunds of franking credits for retirees .

August 12, 2021

Company tax is the tax on a company's taxable income. As a former accountant, no one in my working career ever defined company tax as shareholders income tax paid on their behalf. And it isn't.

August 12, 2021

"no one in my working career ever defined company tax as shareholders income tax paid on their behalf. And it isn't.":

'tis when attached to dividends - whereupon ATO credits it to shareholder - company pays tax, shareholder gets tax credit. Like employer pays wages tax, employee gets wage tax credit.

Warren Bird
August 12, 2021

Well RV, perhaps you should read my article here:

It explains how owning shares and owning a business are not all that different economically, and that's the basis for the imputation system. I'm afraid you are simply wrong - company tax is very definitely tax paid on behalf of the shareholder.

August 13, 2021

Let's straighten out a few things here and Dudley with all respect you are wrong.

1) As a shareholder I own part of the company! Franked dividends are paid to the owners of the company after the company has paid tax on their earnings. This results in the fact that income the owner of the company earns has been already been taxed with 30% hence you as the shareholder aka owner can list this in your tax return as tax already paid. And by the way this is not unique to Australia - you will find this principle in other countries as well. What seems to be unique though is that for retirees these credits are refundable tax credits.

2) Not sure were Dudley takes the wisdom from that employees don't pay tax - in fact they do!! Don't lets confuse the way the tax is transferred to the ATO with who is liable for that tax - it is the employee! The employee at the end of the year needs to declare all income including wages, salaries, rent, dividends etc. and needs to pay tax for the total income and again since as the owner of the company has already paid tax can list this as the tax credit aka tax already paid. Simple.

3) Also retirees pay tax Dudley. The tax on their retirement income - super income stream - has already been taxed in advance - that is called contribution tax and is 15%. So one has paid already tax 30+ years before the income falls due. You can easily work out what your income would be if you apply 15% of tax across the board also considering the tax free threshold.
I lived worked and unavoidably paid taxes in two other countries in Europe (lived approximately 10years in each) and over there the contributions to the pension system about 7 - 8% employee (and another 7-8% employer) are paid from your income before tax is applied. That is why over there you also pay tax on your pension. And as for here, this pension income is listed as overseas income and is taxable and I as the retiree pay tax on it! Lucky me however, treaty's for the avoidance of double taxation do exist with both and tax is only payable in your country of residence - Australia. With one exemption though one country reserves the right to tax the gross amount of pension with income tax rates (no tax free threshold applied - like here if you are not a resident for taxation purposes) up to a maximum of 15% - fancy that - we had seen this 15% somewhere before didn't we!

August 13, 2021

"This results in the fact that income the owner of the company earns has been already been taxed with 30% hence you as the shareholder aka owner can list this in your tax return as tax already paid.":

Companies advise ATO of to whom dividends were paid and to whom franking credits are to be imputed using this form or its electronic equivalents:

It has similarities to PAYG payment summary – business and personal services income:

The similarity being that companies and employers (not shareholders nor employees) are required to pay taxes on profits and wages and are required to report to whom and how much and when.

The dividend and wage recipients are required to pay any deficit or are paid any surplus tax (should they claim it in their lodged tax return).

Dividend or wage recipients (shareholders or employees) pay neither company profit tax nor employee earnings tax.

Both are credited for the tax paid on the amount distributed to them.

August 14, 2021

Thanks for the links Dudley, they confirm exactly what has been said above. A payer WITHOLDS amounts from payments a payee is entitled too (aka their money) and send it to the ATO - just to make sure that the sum required from the payee is not too big at the end of the FY. They know their people. Suggest you read up on Income Tax Assessment Act and other relevant ATO documentation to find out that employees pay tax.

August 14, 2021

"employees pay tax":

Indeed they often do. Just not wages tax - which employers do.

Individuals often pay income tax. Some income might be gross wages - with attached wage tax credits imputed to the wage recipient.

Similarly, dividends.

August 16, 2021

I earn $60,000 in dividends with $20,000 franking credits attached to them. As I am not retired the franking credits are used to pay the tax required on my earnings [ the $18,200 is tax free and then the remaining amount of $31,800 is then taxed at the current tax rate ] just like everyone else in the tax system. When I retire next month I will still earn $60,000 in dividends but the government will send me a cheque for $20,000 meaning the company tax has been paid to me rather than the government. The same situation but one is retired and the other is not. Retirees DON"T pay tax on any earnings outside their accumulation part of their superannuation.

August 16, 2021

@ Martin, sorry but your numbers don't quite add up. We als need to distinguish between who hold the shares you the person or your superfund. Only the superfund may not have to pay taxes for the income derived by the assets that pay your pension once the fund has gone into pension mode and eligibility criteria are met. For you as the person nothing changes retired or not you pay income tax on income earned.

@ Dudley, thanks for agreeing that employees pay income tax. There is just one more thing we need to suss out - what is wages tax can you please point to a legal definition of it. Wages tax does not seem to be a defined term.

August 12, 2021

Dick Smith also said he didn't understand the refund of franking credit concept. This was apparent from the action he took in giving away some of his refund.
The comment that "people on pensions before a certain date were exempt" was only introduced when Labor realized that banning refund of franking credits was going to affect a group who would be expected to support Labor. The group that was to be penalized would typically not normally support Labor.
Labor's position with regards franking credits was unfair and illogical.

Jan H
August 21, 2021

You do not have to be retired to pay no tax. If you earn under the tax free threshold but have dividend income with fully franked credits, you too will get a refund of your FF credits.

August 12, 2021

"Retirees don't pay tax and so they were not going to able to claim any franking credits attached to dividends.":

'Employees don't pay tax and so they should not be able to claim any income tax credits attached to wages.'

August 12, 2021

Still not convinced on the definition of retirement income. You allow no distinction between withdrawl of existing capital (which is NOT income in my view) and withdrawl of capital gains, which is income and the tax office certainly agrees. Truly if one has all their money under a mattress earning zero interest and they spend some of it how can this be described as "income"? Perhaps widen the context from "income" to "earnings" (which would capture capital gains). Of course any source counts, be it super, non-super or pension "earnings" (but earnings from capital gains only count once withdrawn as they may have negative years as well; has to be net realised earnings).

August 12, 2021

This one is a hot topic! I wonder if we should refer to this as cashflows or 'spendings', rather than income, which is often interchanged with 'earnings'. "Where does your retirement cashflow come from?" might be a better framing of the question.

August 12, 2021

The "correct" option was not included, meaning income (as per tax office requirements) from super and non-super, including capital gains was not an option; you had to choose cashed out capital. This reflects the current emphasis on "income" whereas overseas with less dividends and more capital gains, overall increase in value is more of a factor (ie overall earnings). Perhaps the bit we have widely missed out on (but some have picked up) is that even if you are forced to remove some capital from super (as "income") you aren't actually forced to spend it, you can invest it outside super and for a couple you can still earn a decent tax free income on top of the tax free super income so its not as bad as you might think.

August 12, 2021

The results of this survey need to be treated with caution. They are potentially skewed to those of wealthier retirees and hence, not necessarily representative of the broader community. The figure suggested by one responder of $500k to $1 million for a decent aged care place is a concerning number and would seriously challenge the asset pool of most retirees. I suspect that many projections of future investment returns will prove wildly optimistic when the markets eventually revert to mean (and overshoot on the downside before settling there for a decade or more).

Peter Stewart
August 16, 2021

I continue to be amazed about lack of knowledge around aged care.

Yes the cost of accommodation can be $500k to $1 million.

But this can be paid on a daily basis around $55 for every $500k = $22,000 per year.

With average occupancy of 2.8 years, that would require $62,000 set aside for accommodation, not $500,000.

August 16, 2021

But if granny only has say $100,000 in assets and doesn't die in a timely manner, who is going to pay?
Granny may not agree to move to a cheap place once she is comfortable.
Lots of stress for the family. Unless there is something that I am missing in this scenario?

Gary M
August 12, 2021

Graham. Terrific survey work- it is gratifying to have an important survey conducted impartially, with honest informed views from people affected in an era where most commentary these days seems to be conflated for cynical political leverage.

Andrew Baker
August 12, 2021

Great initiative Firstlinks and very interesting results, thank you for sharing. As noted the Firstlinks population which has provided the response is not fully representative of the retirement income population BUT may be more representative of retirement income assets given member-asset concentrations (ie a relatively small % of the members have a majority of the assets).

Particularly interesting is openness to use of housing equity although intention to do so looks much lower.

Extending on Geoff Warren's comments above, the breadth of solutions being envisaged undermines the idea of a retirement income dominant design (other than super itself) and the intent to use a specific retirement income product (which I assume includes annuities) appears quite low. This seems good news for innovators. This does confirm differences between people as Geoff notes, but using multipe approaches may also be a rational response in a DC system where the members bears 100% of the investment risk.

August 12, 2021

Good survey and interesting results, thank you.

Given the results, it would be interesting to survey the extent and methods being deployed by your readers to pass wealth to the next generations before they die. It seems such a shame to wait until one is not there, for one's surplus wealth to be distributed.

Such actions can be profoundly satisfying and allow next generations more time to enjoy & grow such gifts. Given our life expectancy has increased dramatically, I think this topic would also yield some surprising insights.

Thanks again for your educational materials

August 12, 2021

Agree Graham.
I don't consider that either my wife or I will ever qualify for an age pension (I certainly hope we don't anyway) so we won't be constricted by the gifting rules. We plan to give away most of our wealth to our kids/partners during our lifetime (hopefully) so they can benefit when they need it, not when they're over 60.

Phil Crichton
August 12, 2021

The strong attachment to having all funds in Superannuation surprises me.

When I retired, I withdrew all my super and put everything into good dividend stocks. I had to learn about investing, but it has paid handsomely for me and my wife. I pay no fees to anyone, do my own tax returns and have a growing income and capital base every year. Also Centrelink give generous allowances for pensioners to hold stocks, and this helps a lot.

August 12, 2021

If ever there was an advertisement for why it's so important to seek financial advice when retiring, this comment would be it.
Any licensed retirement planning specialist worth his salt could have provided you with advice which ensured that you never paid a cent of tax again throughout your retirement.
You could have still had a portfolio of shares but invested tax-free within super.
The advice fee would have paid for itself many times over.

August 16, 2021

Are you a financial advisor Brett?
Sounds like Phil is happy with his choices and has kept his brain active by learning and managing his finances.
Way to go!

August 12, 2021

The one thing I find reassuring about these results is the concentration on private assets as opposed to the safety net aged pension, which will be paid for by our children and grandchildren, from their taxes. The projections in relation the the falling number of taxpayers supporting increasing numbers of people on ever widening categories of welfare are very concerning, and presumably unsustainable.

August 12, 2021

"Retirees, get over your franking credits. You'll be fine without them.": 'Workers, get over your income tax credits. You did not pay them in the first place.'

August 12, 2021

I’m with you on this one Dudley.

Jeff in Brisbane
August 12, 2021

Franking Credits arent just for retirees!
Maybe you dont like them because you dont get them??

August 12, 2021

I could agree to the thought if it is refundable tax credits. But I would have hated the thought in my working days when I would have had to pay 40% to 45% income tax on income for which 30% tax had already been paid.

August 12, 2021

Labor estimated that more than $ 2.50 Billion would be saved if franking credits for retirees only ( workers were still able to offset income/franking CR ) were abolished.

Most of the $ 2.50 FC is spent in Australia thus boosting the economy.

How would you fill this $ 2.50 billion gap when people have less to spend ?

Do you support double taxation ? or the Foreign parasite hedge funds who have most to gain with the abolition of franking credits.

August 12, 2021

The reality is that the move to restrict refund of franking credits would have provided no net gain to government finances. I would’ve sold my franking rich shares and invested elsewhere to get a higher income. Those shares would’ve been bought by an industry fund or a high net worth investor who would’ve reduced their tax liability with the franking credits From the shares they bought from me, so the government would have no extra cash from the process. That is the point that Bowen missed.

August 12, 2021

To ensure the Retirement Income strategy consultation process is adequate Treasury should seek and canvass the views of more SMSFs on proposals that directly affect them. This could be done by a survey posted or emailed to SMSFs, or a link to a survey on a website. A direct survey of SMSFs would obtain a wider sample of views (not just financial lobby groups) and an indication of whether SMSFs support the proposals or not. If SMSFs, as key stakeholders, are not properly surveyed then the consultation process is flawed and changes cannot be said to be supported, or in the best interests of a cohort most impacted by the changes.

August 12, 2021

The problem here is, that we, the operators of SMFS do not have a body representing our interests. We also have no leverage to enforce our interests - can't say if we do "x" then we have to let go "y" employees or we cannot deliver "z$" tax anymore for the government coffers. The financial lobby groups have the connections and they know how to play according to the old roman wisdom "divide et impera". Remember, the squeakiest hinge gets most of the grease - we might have to find ways that our noise will be heard.

August 12, 2021

Absolutely agree AlanB. It seems to me that the goalposts keep getting moved for those of us who run our SMSF's as best we can and to the rules, but especially in order to support ourselves, not be reliant on a Government Pension. And, the figures mentioned earlier for aged care places are not "pie in the sky" either -- we've been through it with our parents before they passed away. It feels like we can never relax and just enjoy what we have left of our lives, after having worked hard and saved to be "comfortable" and able to help our family. How about a consultation process by Treasury to each and every SMSF, after all, we all pay our public servants! And yes, we are also still paying tax!

August 12, 2021

Graham - of all the comments this one resonates most with me: "have saved all my life and wouldn't be able to change if it's within my power." I really believe many people have an internal blueprint they follow, often largely influenced by parents / family they were brought up with (for good or bad ... I know of several 'kids' keen not to replicate 'their parents mistakes' in wealth creation / maintenance). It's often hard to break that ! What the survey results tell me is that most people are reasonably fair and also reasonably savvy about financial reality for both themselves and for what a Government should be expected to do to assist (or not) oldies. If only the same comment were true for Governments !

August 12, 2021

I'm with you on this comment

August 11, 2021

"The sum of responses over 4.1% was 51% so there is a fair amount of optimism that growth assets will continue to deliver, because money would run out over 30 years if invested in term deposits at 1%.":

Capital could be 'run out' but not income if eligible for Age Pension - a bottom less cup.

Running out of capital would result in more income due to the Age Pension Assets Test taper rate for those couples with less than ~$1,500,000 investable.

Geoff Warren
August 11, 2021

For me, a key takeaway was the wide and relatively even spread of responses. It just confirms people are different, and this is particularly the case in the retirement phase. (Catering effectively for these differences will be a major challenge for the industry. Comprehensive advice can only do so much.)


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