Super reforms - what do you think?

[toOZ2012]

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?

 

Keystart looks like it's a bit more streamlined and parent's financial status will not be affected.

[Paul1Perth]

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.

 

I think it was the other way round. Australia only introduced compulsory super in 92, the week I started my first job in Aus. The UK have always had the National Insurance payment and several companies had pension plans on top of that. I already get a part pension from the UK as I worked for the National Coal Board for about 10 years. Considering my first pay packet was 7pounds 14 shillings and I only worked for them for that time I was pleasantly surprised by how much I got when I was able to get it at 50. I waited until I was 55 as it meant a better pay out. I got a lump sum and so much a month for the rest of my life.

 

I know there are worries now that the money to support all the people retiring and living longer than people thought is running out. I'm sure all the extra expense that's going to go on refugees will put further strain on it, but at least they put something in place a long time before Aus did.

[Keith and Linda]

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?

 

I keep refereeing to what I have both experienced and witnessed and also know of other similar situations, I am not saying it is a cover all, something which you seem to do, I am merely pointing these things out and need to be considered as part of the whole.

 

Regarding your last paragraph, the thing is you knew the rules regarding income tax beforehand, just as much as the folks knew the rules about pensions too, thought about it and planned/acted accordingly. Also like yourself others have worked hard to better their lives, whether that be like yourself by education to gain a better paid job or working long hours, doing more than one job, going without some of life's comforts. Why after all this hard work should they be made to sacrifice more of their hard earned money over those that have not put in the hard yard.

 

I am sure that at the time when you was thinking about your education and job prospects it was more about the career and money and not a single thought about paying for your own pension entered your head!

[Bungo]

I think it was the other way round. Australia only introduced compulsory super in 92, the week I started my first job in Aus. The UK have always had the National Insurance payment and several companies had pension plans on top of that. I already get a part pension from the UK as I worked for the National Coal Board for about 10 years. Considering my first pay packet was 7pounds 14 shillings and I only worked for them for that time I was pleasantly surprised by how much I got when I was able to get it at 50. I waited until I was 55 as it meant a better pay out. I got a lump sum and so much a month for the rest of my life.

 

I know there are worries now that the money to support all the people retiring and living longer than people thought is running out. I'm sure all the extra expense that's going to go on refugees will put further strain on it, but at least they put something in place a long time before Aus did.

 

NI contributions and super are not comparable. NI does not go into a pot with your name on, it is not ring fenced, it could even be withdrawn, a lot of young people think they will be no such thing as a state pension by the time they reach that age.

 

Yes some companies made pension provision for employees, but it was not mandatory and many did not, especially SMEs. It is only now that AE (auto enrolment) has been brought in, this is more like super. It is being introduced in stages and some companies will have staging dates in 2017, I don't think there are any beyond that.

[Ken]

I think it was the other way round. Australia only introduced compulsory super in 92, the week I started my first job in Aus. The UK have always had the National Insurance payment

 

National Insurance is not the same as Super by any stretch of the imagination. It's Income Tax by a different name to try and trick gullible people into thinking they're paying less tax than they really are. The money is not invested into a pot for your (or anyone else's) retirement and is spent by the treasury as soon as it is received as with any other tax. Both the UK state pension and the Australian aged pension are paid for out of current taxation. By introducing compulsory super back in 92 the Australian government will have a smaller bill to pay from taxation in future years than will the UK government who have only belatedly made pension schemes compulsory. Yes it's true that some UK employers have had pension schemes for decades but then some employers in Australia had schemes before 1992 as well.

[toOZ2012]

I keep refereeing to what I have both experienced and witnessed and also know of other similar situations, I am not saying it is a cover all, something which you seem to do, I am merely pointing these things out and need to be considered as part of the whole.

 

Regarding your last paragraph, the thing is you knew the rules regarding income tax beforehand, just as much as the folks knew the rules about pensions too, thought about it and planned/acted accordingly. Also like yourself others have worked hard to better their lives, whether that be like yourself by education to gain a better paid job or working long hours, doing more than one job, going without some of life's comforts. Why after all this hard work should they be made to sacrifice more of their hard earned money over those that have not put in the hard yard.

 

I am sure that at the time when you was thinking about your education and job prospects it was more about the career and money and not a single thought about paying for your own pension entered your head!

 

Income tax doesn't change very often, as you say I was certainly aware of it. It's the benefits that keeps changing and seeing too many cases of abuse in the system. As a contributing member, I have a say in how my tax dollars are spent so do anyone else that contributes.

 

Why would I deny benefits for myself in the future? Because it's not sustainable in the long run and I believe the welfare system is wonderful for second chances and want it to be there in 50 years time. Also, take note that most retirees will eventually go on the pension system cause they'll have used up their savings and now need it, fair enough.

 

People who don't put in the hard yard are abusers of the system. Why would good people want to do the same as them?

 

Like I've been saying in the other posts, Welfare shouldn't be seen as an entitlement but rather as a safety net. And the threshold for aged pension safety net is not all-accounting at the moment. It's safe to say that someone with no money in the bank or a house needs it but is it safe to say that someone with million dollar assets need it? I don't think so.

[Paul1Perth]

National Insurance is not the same as Super by any stretch of the imagination. It's Income Tax by a different name to try and trick gullible people into thinking they're paying less tax than they really are. The money is not invested into a pot for your (or anyone else's) retirement and is spent by the treasury as soon as it is received as with any other tax. Both the UK state pension and the Australian aged pension are paid for out of current taxation. By introducing compulsory super back in 92 the Australian government will have a smaller bill to pay from taxation in future years than will the UK government who have only belatedly made pension schemes compulsory. Yes it's true that some UK employers have had pension schemes for decades but then some employers in Australia had schemes before 1992 as well.

 

No matter how you word it that's where the money is coming from to pay for the pension of millions of people. My Mum included and my Dad up until last year when he died. They did OK in retirement, couldn't get out much mind you and the pension used to mount up until my Sis took them round to withdraw it. He was 92 when he died so had a decent innings.

 

I've heard many times what is and isn't "sustainable". Makes you wonder how anything gets built or maintained or people looked after in their old age, maybe it's all on borrowed money and the amount the UK can borrow will, one day be called in. There has to be a change in expectations and living standards if things are to carry on that's for sure. You don't think the Super schemes are any better or guaranteed do you? I heard that about Endowment Mortgages when we had one in the 80's.

[flag of convenience]

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.

 

There are already reverse mortgages in place. I can't see why this shouldn't be compulsory after a value of so much to be determined. It need not be a huge amount but enough to help subsidise the asset rich but cash poor brigade. Those without substantial housing wealth or super should be entitled to a mix of the three.

[flag of convenience]

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.

 

Forced savings are of course beneficial to those that able to do so. I have long held a policy that I am my own bank and work to that accordingly. Having lost a substantial amount in super followed by a few years of negative growth, during the GFC convinced me to take matters into hand.

[flag of convenience]

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.

 

The onus being on home ownership as it is a major stay of the Australian economy. Yes there are lots of deals, probably in less choice suburbs but can be of assistance to lower paid as long as the terms are right and people are not over leveraged due to their circumstances. Very easy to happen with a car loan, perhaps part time/casual/ non permanent work which can really pile on the stress in times of crisis.

 

I still think a secure tenancy within the rental area should be available to those who can't / don't wish to for whatever reason/ have an insecure employment future/ etc. It was easy until quite recently I believe for folk to secure a loan with ease although not always in a position to take on such a feat. Some were encouraged by none to scrupulous lenders which brought on great stress.

[Keith and Linda]

Forced savings are of course beneficial to those that able to do so. I have long held a policy that I am my own bank and work to that accordingly. Having lost a substantial amount in super followed by a few years of negative growth, during the GFC convinced me to take matters into hand.

 

This forms part of my argument, people take the risks, sometime they do not pay off and this is the same with your own home, what is there to say your $1m home slumps to being a $750k home, is the Gov after forcing you to take out a reverse mortgage going to compensate you $250k? Is the lender going to call in your loan?

[Keith and Linda]

Keystart looks like it's a bit more streamlined and parent's financial status will not be affected.

 

I think it will be affected, as it will, if they have already remortgaged, limit the amount of reverse mortgage they could get.

[Keith and Linda]

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.

 

OK I checked the figures given to me and to get a return equal to the married couple pension of $33,712pa you would need an investment of $1.376m in a term deposit account that would mean to get that sum on a reverse mortgage of 60% your house would have to be worth some $2.25m. what percentage of houses are worth that I wonder?

I see what can go into the pot getting smaller and smaller so much so that the cost of administering such a scheme would be more than it gets in return, especially when you will have to factor in buffer zones for interest fluctuations and other costs and charges.

 

However I could accept that maybe, just maybe a higher value baseline, which could be what ? $4m, $10m could totally exclude you from gov pension.

 

Not sure on exact % you can get on reverse mortgage I believe at one time it was max 60% but the actual % varies with your age against expected life, so at age 65 you may only get 40%

Just one of the complications of any such plans which will have to be considered I suppose.

[toOZ2012]

I think it will be affected, as it will, if they have already remortgaged, limit the amount of reverse mortgage they could get.

 

No no. Keystart is a state run program. They don't even look at parent's financial status, just the person borrowing.

 

http://www.keystart.com.au/

[Keith and Linda]

No no. Keystart is a state run program. They don't even look at parent's financial status, just the person borrowing.

 

http://www.keystart.com.au/

 

OK where keystart is not available or taken up and where parents have already helped and will help in the future, how can this not affect the reverse mortgage scheme you propose for retirement?

[toOZ2012]

OK I checked the figures given to me and to get a return equal to the married couple pension of $33,712pa you would need an investment of $1.376m in a term deposit account that would mean to get that sum on a reverse mortgage of 60% your house would have to be worth some $2.25m. what percentage of houses are worth that I wonder?

I see what can go into the pot getting smaller and smaller so much so that the cost of administering such a scheme would be more than it gets in return, especially when you will have to factor in buffer zones for interest fluctuations and other costs and charges.

 

If someone looses their job and wants to go on unemployment benefit then Centerlink will first check if the person has savings and such before they even think about handing out a payment. So someone with less than $1.376m, say $1m in term deposit should be eligible for the full pension? The savings/assets/super should be seen as a way to top-up the age pension not keep everything and still get full aged pension - that's this whole thread about entitlement.

 

However I could accept that maybe, just maybe a higher value baseline, which could be what ? $4m, $10m could totally exclude you from gov pension.

 

I honestly doubt that there would be many retirees with a $4m principal home but no other assets/savings/super etc which will disqualify them from aged pension anyway.

 

Not sure on exact % you can get on reverse mortgage I believe at one time it was max 60% but the actual % varies with your age against expected life, so at age 65 you may only get 40%

Just one of the complications of any such plans which will have to be considered I suppose.

 

The current reverse mortgage schemes by commercial banks are not a good choice. The document also talks about reforms to the govt pension loan scheme.

[Keith and Linda]

If someone looses their job and wants to go on unemployment benefit then Centerlink will first check if the person has savings and such before they even think about handing out a payment. So someone with less than $1.376m, say $1m in term deposit should be eligible for the full pension? The savings/assets/super should be seen as a way to top-up the age pension not keep everything and still get full aged pension - that's this whole thread about entitlement.

 

 

 

I honestly doubt that there would be many retirees with a $4m principal home but no other assets/savings/super etc which will disqualify them from aged pension anyway.

 

 

The current reverse mortgage schemes by commercial banks are not a good choice. The document also talks about reforms to the govt pension loan scheme.

 

Precisely, and there will also not be many over $2.25m either, nor around the $1m which are mortgage free. So there will not be enough going in to the pot to make the scheme work efficiently.

The cost/benefit of running any such scheme which will have to include interest charges to the Gov for Loans which could become massive as the scheme grows, would need to be assessed for viability, which in my opinion would be a cost rather than a saving.

There are other more workable and less costly (to Gov) ways to get extra funding for pensions, they will however still be controversial and kick up a stir, for example a simple change in tax thresholds on income after retirement age is one, at least that is based on what cash producing asset you have and is not dissimilar to how you have paid tax all you working life.

[toOZ2012]

 

Precisely, and there will also not be many over $2.25m either, nor around the $1m which are mortgage free. So there will not be enough going in to the pot to make the scheme work efficiently.

The cost/benefit of running any such scheme which will have to include interest charges to the Gov for Loans which could become massive as the scheme grows, would need to be assessed for viability, which in my opinion would be a cost rather than a saving.

There are other more workable and less costly (to Gov) ways to get extra funding for pensions, they will however still be controversial and kick up a stir, for example a simple change in tax thresholds on income after retirement age is one, at least that is based on what cash producing asset you have and is not dissimilar to how you have paid tax all you working life.

 

If there aren't many with $1m in assets then there wouldn't be so many people calling foul. It's not just about now, the number of working people supporting the aged is increasing at an alarming rate. Measures taken early will make sure that the Govt can even pay a pension to those that really need it in the future.

 

Yes, there are other ways but *hiding* the family home is not going to cut it in the long run. It's a legal way to conceal wealth and still take welfare.

 

You must have seen the reforms that take effect in 2017. Change in tapering rates but you know what some *pensioners* are doing? They are using up their assets/savings to up-size cause it will be exempted and they can still claim full pension even under the new rules.

[Keith and Linda]

If there aren't many with $1m in assets then there wouldn't be so many people calling foul. It's not just about now, the number of working people supporting the aged is increasing at an alarming rate. Measures taken early will make sure that the Govt can even pay a pension to those that really need it in the future.

 

Yes, there are other ways but *hiding* the family home is not going to cut it in the long run. It's a legal way to conceal wealth and still take welfare.

 

You must have seen the reforms that take effect in 2017. Change in tapering rates but you know what some *pensioners* are doing? They are using up their assets/savings to up-size cause it will be exempted and they can still claim full pension even under the new rules.

 

Most folk will be just looking at it as having their hard worked for home being used in the equation, whereas someone that does not have a home is not affected. whatever system is in existence then people are going to find and abuse the loopholes. I would say though it may not be a financially prudent move to transfer your cash assets into property just to claim a few dollars extra from the Gov as my previous post points out you need a large deposit to start getting anywhere near a return to equal the pension. Or to put it more simply why move $1.376m out of your bank which is earning your $33712 just to claim the exact same amount from the Gov, one would also have to take in stamp duty and other costs and fees, higher rates running and maintenance costs into consideration too. As I have said before, personally if I had $1m+ cash assets I would not currently claim Gov pension.

[Parley]

You cant claim a government pension with $1m+ cash assets.

[toOZ2012]

Most folk will be just looking at it as having their hard worked for home being used in the equation, whereas someone that does not have a home is not affected. whatever system is in existence then people are going to find and abuse the loopholes. I would say though it may not be a financially prudent move to transfer your cash assets into property just to claim a few dollars extra from the Gov as my previous post points out you need a large deposit to start getting anywhere near a return to equal the pension. Or to put it more simply why move $1.376m out of your bank which is earning your $33712 just to claim the exact same amount from the Gov, one would also have to take in stamp duty and other costs and fees, higher rates running and maintenance costs into consideration too. As I have said before, personally if I had $1m+ cash assets I would not currently claim Gov pension.

 

Come 2017, if one has $1m in additional assets(exempting family home) they wouldn't be eligible for a pension. Thank god for that.

[toOZ2012]

You cant claim a government pension with $1m+ cash assets.

 

I think one can, the current limit seems to be around $1.2m for home owners.

 

EDIT: Just goes to show how overly generous the govt is when coming to aged pensions.

[Parley]

Definitely not that much for a full pension.

[flag of convenience]

This forms part of my argument, people take the risks, sometime they do not pay off and this is the same with your own home, what is there to say your $1m home slumps to being a $750k home, is the Gov after forcing you to take out a reverse mortgage going to compensate you $250k? Is the lender going to call in your loan?

 

Well as you concur the artificially created housing casino for that is what it has become, offer few guarantees. Government forced reverse mortgage would only be enforceable over a certain amount. No body would lose their house in their lifetime. I pension should in my view partly supplement the reverse income under a sensible amount.

Hardly difficult to work out a reasonable amount which of course should be adjusted come further falls, or rises for that matter.

[flag of convenience]

I think one can, the current limit seems to be around $1.2m for home owners.

 

EDIT: Just goes to show how overly generous the govt is when coming to aged pensions.

 

I don't find much at all generous about the Australian pension. It is subsistence level at best. A couple is allowed a few hundred thousand which is little considering today's costs. If one partner is older and other working forget it completely. The working partner is expected to sustain the older one.

Makes for separation real or pretend IMO. Ageist and anti family. Especially considering it is usually the femme side that is the younger partner.