Super reforms - what do you think?

[Keith and Linda]

It's current generation not leaving a s**t of a mess to clean up for the next. You have an interesting definition of a common-man and also assume that all people without savings are there by choice.

 

I say, people with wealth should take on more fiscal responsibility - whether it be a working person with higher income, a business with higher revenues or retirees with higher wealth than the common-man.

 

Mind you, I pay taxes (more than an average person I might add), have private insurance, don't get or expect any hand-outs and with a bit of hard work and luck, I will retire with sufficient wealth to not rely on the welfare system or anyone else for that matter but not all people are dealt the same cards.

 

The point I am really trying to drive home is that welfare is not an entitlement as some seem to believe.

 

Do not believe I have mentioned "common man" anywhere! However regarding the cards you're dealt then It is also how you play your hand too and you should not be penalized for playing a poor hand well.

I wish you well in your endeavors.

[toOZ2012]

Do not believe I have mentioned "common man" anywhere! However regarding the cards you're dealt then It is also how you play your hand too and you should not be penalized for playing a poor hand well.

I wish you well in your endeavors.

 

You mentioned working man which from the context is inferred as common-man. We wouldn't be talking about a wealthy man working for reasons other than money?

 

Not the life gives lemons, make lemonade non-sense. It's easier said than done and sometimes people fail even if they have sincerely tried. God forbid, I may fail too and when I do I want the welfare system to be fully functional with decent rates to really make a difference and get me back up on my feet and start giving back to the system again.

[toOZ2012]

I understand that welfare payments are a sensitive subject. I think we covered a few aspects of current aged pension system and wish to conclude this thread here. Thanks everyone for their 2c or taking 2c - I kid, I kid.

[Gbye grey sky]

If only that works. The average family contributing around $6k(before tax) or $5.1k(after 15% tax) to super each year. Multiply that by say 35 years. That's approx $180k in contributions. Now assume that super has performed superbly and there was some wage growth and say they end up with $300k(if lucky) in 2050 dollars. In 2050, they retire and start drawing from their super. Since they don't have a house of their own, $50k/year is needed to just pay rent and survive. So their super will be exhausted in 6 years or maybe 8 and then falling back on age pension for the rest of their long natural lives.

 

If they were allowed to borrow say $40k from their super to hep with their first home? How much better off would they be? I'll leave that as an exercise to the reader.

 

You are assuming here that during a persons working life of 40 years their kids never grow up and they are therefore never able to top up Super contributions. I agree with Bungo that most people do not consider that one day they may want to stop working and raiding their Super fund sends out all the wrong messages.

 

You also assume that investing in property is a winning investment but investment in Super is lost money.

[Parley]

I understand that welfare payments are a sensitive subject. I think we covered a few aspects of current aged pension system and wish to conclude this thread here. Thanks everyone for their 2c or taking 2c - I kid, I kid.

 

I think you lost the argument. But interesting none the less.

[toOZ2012]

I think you lost the argument. But interesting none the less.

 

You didn't follow it very thoroughly, then. I put two arguments forward

1) Including the family home in the assets test. Which I supplied plenty of supportive arguments while others where just crying foul.

2) Allowing access to super funds to help first home buyers get a break - Plenty of posts covering this as well.

 

Just because the topic is unpopular with the people who posted here doesn't make my argument any less valid.

[Parley]

Well no one agreed with you.

[toOZ2012]

You are assuming here that during a persons working life of 40 years their kids never grow up and they are therefore never able to top up Super contributions. I agree with Bungo that most people do not consider that one day they may want to stop working and raiding their Super fund sends out all the wrong messages.

 

You also assume that investing in property is a winning investment but investment in Super is lost money.

 

Yes they can but will they? The simplified calculations are to make it easier for people to understand the bigger picture.

 

Home ownership is not the same as buying extra properties for investment. Super doesn't have leverage and the rent, which is wasted money, can be used to pay off the mortgage. I said that property prices tend to increase more often than not, which is true. Factor in all those factors and you can see how home ownership is not such a bad thing.

 

Try getting the average person to invest outside super or in super for that matter. The aim of super reforms is help people to save for retirement and it's no secret that the family home is the biggest asset for many retirees.

[toOZ2012]

Well no one agreed with you.

 

You mean people with vested interests? Of course not.

[Parley]

Funny that. Working people having a vested interest in preparing for retirement.

[toOZ2012]

People who are close to their retirement that posted here. Vested interests in keeping the age pension as is because it benefits them personally. One gentleman even resorted to a personal attack, that's how unpopular this topic is.

[flag of convenience]

First home buyers are in it for the long run. I agree that they may pay a lot more than its intrinsic value but so do a lot of others. First home over 20 to 30 years is relatively safe investment.

 

 

 

While renting is good, the money is pretty much wasted. However if that was used to pay off the mortgage - they'll have a sizable nest egg when they retire.

 

 

 

Always the case but the matra "Time in market and not timing the market" truly applies here because of very long term holding.

 

Even the US market with it's horrible housing market crash. Most places have started to regain their value - There are some that are very close to what people paid 10 to 20 years ago but they still own it. As opposed to having nothing by renting.

 

I strongly believe home ownership is a good way to save for retirement.

 

First Home buyers may be in the market for a long duration but usually tend not to remain the initial purchase. Hence the amount leveraged often grows substantially.

Money need not necessary at all be wasted renting. In many countries people that could well afford to buy don't out of choice and rent. There is still the mortgage to pay which is equally money wasted. The thinking in a time of massive housing over inflation a lot of the old rules don't necessary apply.

There are a lot of variables to be considered .

 

I agree at the end of the day the basic essential of a roof over ones head is assured though, when and if the entire system collapses. There are other methods of course to invest towards age outside the housing scenario which is a massive tying up of funds that could be put to other use during retirement.

[flag of convenience]

Yes they can but will they? The simplified calculations are to make it easier for people to understand the bigger picture.

 

Home ownership is not the same as buying extra properties for investment. Super doesn't have leverage and the rent, which is wasted money, can be used to pay off the mortgage. I said that property prices tend to increase more often than not, which is true. Factor in all those factors and you can see how home ownership is not such a bad thing.

 

Try getting the average person to invest outside super or in super for that matter. The aim of super reforms is help people to save for retirement and it's no secret that the family home is the biggest asset for many retirees.

 

But besides the non payment of rent it is not a productive investment. If the super fund was raided to purchase a house then surely home owners should be compelled to downsize come retirement to fund retirement. The super being of course to assist with living once no longer working. Perhaps do away completely with a super fund and give extra incentives to invest?

[NicF]

You didn't follow it very thoroughly, then. I put two arguments forward

1) Including the family home in the assets test. Which I supplied plenty of supportive arguments while others where just crying foul.

2) Allowing access to super funds to help first home buyers get a break - Plenty of posts covering this as well.

 

Just because the topic is unpopular with the people who posted here doesn't make my argument any less valid.

 

My first instinct is to agree that the family home should be included in the assets test for the pension but not agree with allowing access to first home buyers to buy a property, although I'm still a little undecided on the latter.

[Gbye grey sky]

Yes they can but will they? The simplified calculations are to make it easier for people to understand the bigger picture.

 

Home ownership is not the same as buying extra properties for investment. Super doesn't have leverage and the rent, which is wasted money, can be used to pay off the mortgage. I said that property prices tend to increase more often than not, which is true. Factor in all those factors and you can see how home ownership is not such a bad thing.

 

Try getting the average person to invest outside super or in super for that matter. The aim of super reforms is help people to save for retirement and it's no secret that the family home is the biggest asset for many retirees.

 

The plain truth is that they should. Super is a retirement plan so taking part or all of it when young as a deposit on a home is a complete departure on its purpose. You might just as well deduct an amount from salary as a savings plan for a future home. People need to start to understand how the choices that they make will impact their future. Australia's Super Funds are a great example of forward thinking which countries like the UK are trying to emulate 20 years late and half-heartedly.

[Ken]

It's current generation not leaving a s**t of a mess to clean up for the next. You have an interesting definition of a common-man and also assume that all people without savings are there by choice.

 

I say, people with wealth should take on more fiscal responsibility - whether it be a working person with higher income, a business with higher revenues or retirees with higher wealth than the common-man.

 

Mind you, I pay taxes (more than an average person I might add), have private insurance, don't get or expect any hand-outs and with a bit of hard work and luck, I will retire with sufficient wealth to not rely on the welfare system or anyone else for that matter but not all people are dealt the same cards.

 

The point I am really trying to drive home is that welfare is not an entitlement as some seem to believe.

 

I don't understand the distinction you're making being welfare and tax. If at the end of the year you're "entitled" to a tax refund surely you take it? Welfare is no different. The ATO consider they are entitled to a share of your income. Anytime the government tell you that you can have a refund (whether they call it a tax refund or welfare or a first home owners grant is irrelevant) grab it with both hands because as soon as they decide to make themselves entitled to a larger share of your income they won't give you a choice about it.

[toOZ2012]

First Home buyers may be in the market for a long duration but usually tend not to remain the initial purchase. Hence the amount leveraged often grows substantially.

Money need not necessary at all be wasted renting. In many countries people that could well afford to buy don't out of choice and rent. There is still the mortgage to pay which is equally money wasted. The thinking in a time of massive housing over inflation a lot of the old rules don't necessary apply.

There are a lot of variables to be considered .

 

I agree at the end of the day the basic essential of a roof over ones head is assured though, when and if the entire system collapses. There are other methods of course to invest towards age outside the housing scenario which is a massive tying up of funds that could be put to other use during retirement.

 

What do people that just rent without ever owning a home do when it comes to retirement? Unless they are reasonably savvy with other forms of investments or just aggressively saving? I agree that investment in real estate is no longer what it used to be but the average person can still benefit from it even more so if it's their family home.

 

Yes, they may sell before they retire and whatever they took out of the super has to be paid back.

 

The document also suggests reforms to let people age in place and expanding the pension loans scheme to extract equity out of the family home.

[toOZ2012]

But besides the non payment of rent it is not a productive investment. If the super fund was raided to purchase a house then surely home owners should be compelled to downsize come retirement to fund retirement. The super being of course to assist with living once no longer working. Perhaps do away completely with a super fund and give extra incentives to invest?

 

Forced savings are a good thing, plenty of evidence that it is working in many countries and here as well. Given the choice, I think, a lot of retirees would love to age in place. Govt extracting equity from the family home and using it to fund part of the retirement seems fair rather than forcing people to downsize.

 

Incentives to invest only seem to be benefiting the financially savvy and the rich. Housing affordability is something that needs to be seriously looked at and pseudo-controlled by the govt while being careful not to stifle growth.

[toOZ2012]

But besides the non payment of rent it is not a productive investment. If the super fund was raided to purchase a house then surely home owners should be compelled to downsize come retirement to fund retirement. The super being of course to assist with living once no longer working. Perhaps do away completely with a super fund and give extra incentives to invest?

 

Flag, you may already know this. I was reading up on housing affordability and came across this program called Keystart where low income earners can buy a house with only 2% deposit and no LMI. I crunched a few numbers, their interest is much higher than what one can get from a bank so the LMI is indirectly being paid in 3 to 4 years. They also have other programs where they keep a 20% share of the property so that the owner is only responsible for 80% of the payments and when ready buy back the 20%.

 

Interesting stuff on their website and the low default rates compared to industry average. I don't know know if similar programs are available in other states but seems like a good program and if improved is probably a better solution than accessing super, still encouraging home ownership of course.

[toOZ2012]

The plain truth is that they should. Super is a retirement plan so taking part or all of it when young as a deposit on a home is a complete departure on its purpose. You might just as well deduct an amount from salary as a savings plan for a future home. People need to start to understand how the choices that they make will impact their future. Australia's Super Funds are a great example of forward thinking which countries like the UK are trying to emulate 20 years late and half-heartedly.

 

As much as I would love to see people take more financial responsibility for their retirement, it took forced savings (compulsory contributions) to even get a start. More needs to be done. Increasing the contribution rate is one such thing which the current government delayed by a great deal. How many people on this forum actively check their super like their bank account and try to balance their portfolio every now and then?

 

People seem to think that welfare is an entitlement, with tighter rules may be more will start thinking about their financial future.

[toOZ2012]

I don't understand the distinction you're making being welfare and tax. If at the end of the year you're "entitled" to a tax refund surely you take it? Welfare is no different. The ATO consider they are entitled to a share of your income. Anytime the government tell you that you can have a refund (whether they call it a tax refund or welfare or a first home owners grant is irrelevant) grab it with both hands because as soon as they decide to make themselves entitled to a larger share of your income they won't give you a choice about it.

 

You seem to be complaining about the high taxes here. Yes, that's the cost of handing out welfare payments to people who don't need it and defense budgets to bomb people instead of taking in refugees.

 

Yes, if welfare/tax refund/grant/whatever is available to people who don't need it then it will be (ab)used. I am saying we need to have tighter rules so only people in need have access to it.

 

For a person to try and make his mark, he needs 1) health and 2) skills/education and only if needed 3) welfare payments to give him a push.

[Keith and Linda]

People who are close to their retirement that posted here. Vested interests in keeping the age pension as is because it benefits them personally. One gentleman even resorted to a personal attack, that's how unpopular this topic is.

 

Of course they have a vested interest and as part of their current calculations Gov pension was more than likely factored in to there calculations.

At a recent retirement planning meeting I attended we were informed that to equal the government pension one would have to have invested in a term deposit account (and based on current interest rates) over $600k ( I will check the exact figures and single/couple too).

So lets say I have no savings but my house is worth $1m I can remortgage 60% $600k and invest it, wait a year to get the full return equivalent to the Gov pension. Where as my friends who also has no savings, his house is only worth $350k, remortgage 60% $210k. So based on this he starts getting a fair chunk of Gov pension whilst I get nothing! we still have the same income now but I have nothing extra to show for my years of trying to better my life style.

I just cannot see how this system works fairly at all.

[flag of convenience]

You seem to be complaining about the high taxes here. Yes, that's the cost of handing out welfare payments to people who don't need it and defense budgets to bomb people instead of taking in refugees.

 

Yes, if welfare/tax refund/grant/whatever is available to people who don't need it then it will be (ab)used. I am saying we need to have tighter rules so only people in need have access to it.

 

 

 

For a person to try and make his mark, he needs 1) health and 2) skills/education and only if needed 3) welfare payments to give him a push.

 

I'd say that there are rules a plenty already in Australia with regards to entitlement especially for those in need.

[Keith and Linda]

Flag, you may already know this. I was reading up on housing affordability and came across this program called Keystart where low income earners can buy a house with only 2% deposit and no LMI. I crunched a few numbers, their interest is much higher than what one can get from a bank so the LMI is indirectly being paid in 3 to 4 years. They also have other programs where they keep a 20% share of the property so that the owner is only responsible for 80% of the payments and when ready buy back the 20%.

 

Interesting stuff on their website and the low default rates compared to industry average. I don't know know if similar programs are available in other states but seems like a good program and if improved is probably a better solution than accessing super, still encouraging home ownership of course.

 

Shared equity was about years ago in the uk, not to sure on how it is now either in UK or Aus, but in effect it is still around because a few parents do help their children out with deposits and payments with some parents remortgaging to do so. Not sure how that would affect the parents ability in then having to remortgage for their own pension?

[toOZ2012]

Of course they have a vested interest and as part of their current calculations Gov pension was more than likely factored in to there calculations.

At a recent retirement planning meeting I attended we were informed that to equal the government pension one would have to have invested in a term deposit account (and based on current interest rates) over $600k ( I will check the exact figures and single/couple too).

So lets say I have no savings but my house is worth $1m I can remortgage 60% $600k and invest it, wait a year to get the full return equivalent to the Gov pension. Where as my friends who also has no savings, his house is only worth $350k, remortgage 60% $210k. So based on this he starts getting a fair chunk of Gov pension whilst I get nothing! we still have the same income now but I have nothing extra to show for my years of trying to better my life style.

I just cannot see how this system works fairly at all.

 

If and when the rules change. It would be more like using equity in your house to top-up the part pension you are eligible for. Once the equity goes below a certain threshold, you'll go on full pension.

 

You still seem to be referring to people less fortunate as not hard working or as blew their money sort of thing. Not always true.

 

Tell me if this is fair. After high school, I worked hard to get my 2 degrees and my pay reflects that. Just cuz I make decent money now, should ATO consider all the effort I put into getting where I am and reduce my taxes?