Pensions

[Guest kev and del]

Hi everyone i just want to ask anyone out there if pensions are means tested or do the aussies work on the same system as britain

[Quoll]

Old age pensions are not universal - you have to be very poor in order to get the pittance that is a government pension and everyone is encouraged (and even penalized if they fail to) to contribute to a superannuation scheme. You will need to put in far more than the minimun in order to develop a reasonable superannuation pot to support you in your retirement. So, no, pensions are not in the least like the UK.

[Guest BRISSYBOUND]

Old age pensions are not universal - you have to be very poor in order to get the pittance that is a government pension and everyone is encouraged (and even penalized if they fail to) to contribute to a superannuation scheme. You will need to put in far more than the minimun in order to develop a reasonable superannuation pot to support you in your retirement. So, no, pensions are not in the least like the UK.

How much is minimum percentage and do employers contribute a percentage?

[Quoll]

How much is minimum percentage and do employers contribute a percentage?

 

Information about super is here Introduction to super

[Guest BRISSYBOUND]

Information about super is here Introduction to super

Thanks for that ,Quoll.Looks better than some of the pensions I've had here.Fred

[Quoll]

Thanks for that ,Quoll.Looks better than some of the pensions I've had here.Fred

 

Dont know about that but there are some very anxious people right now whose super money is in the market and who have seen their pot plummet by thousands of dollars overnight. Without the safety net of the govt pension to support them, they are not a happy little bunch. A whole lot of retirees were so p*ssed off by the recent budget that they demonstrated in Melbourne just afterwards.

 

It's certainly something worth talking to a financial advisor about - salary sacrificing and paying more than the basics is definitely the way to go - just wish we had done it sooner!

[Guest Pinhead]

They love a demonstration in Melbourne, when I lived there they had them practically every week!

[Quoll]

They love a demonstration in Melbourne, when I lived there they had them practically every week!

 

LOL yes, but it usually isnt the aged wrinklies stripping to the buff though!

[Guest BRISSYBOUND]

Dont know about that but there are some very anxious people right now whose super money is in the market and who have seen their pot plummet by thousands of dollars overnight. Without the safety net of the govt pension to support them, they are not a happy little bunch. A whole lot of retirees were so p*ssed off by the recent budget that they demonstrated in Melbourne just afterwards.

 

It's certainly something worth talking to a financial advisor about - salary sacrificing and paying more than the basics is definitely the way to go - just wish we had done it sooner!

Why are people p***ed off, 9% of basic is three times the best an employer has ever put into a pension for me and it was not compulsory.Are pensions self managed in Oz or do you just pay into funds you can pick and change and then leave it to the experts.Fred

[Quoll]

Why are people p***ed off, 9% of basic is three times the best an employer has ever put into a pension for me and it was not compulsory.Are pensions self managed in Oz or do you just pay into funds you can pick and change and then leave it to the experts.Fred

 

They were ticked off at getting nothing from the budget which is why they protested. Remember that we dont have a universal old age pension so super is pretty much at the whim of wherever it has been invested and it takes a lot of contributing to get your lump sum up to a level that is capable of supporting you through the ups and downs of the economic cycle for 30 years or however long you have after you retire. Just the compulsory contribution is not going to do it. Some folk are having to go back to work because their pension has been so diminished and yet they are not eligible for the govt pension - reverse mortgages are an increasing phenomenon too as people have to use the equity in their homes just to survive. Self funded retirees get none of the benefits of free medical, prescriptions, travel etc.

 

Funds can be either self managed or managed by the super company's specialists. You can pick and choose who you go with these days. Sadly the days of the gold plated super schemes - like the public service schemes - are long gone and pretty much all of them are subject to the vagaries of the market. If you are just beginning the process then obviously you have a better chance at taking the riskier wealth creating options but the older you get the more anxious you get!!!

[Guest BRISSYBOUND]

See what you mean now,same problem in all western style economies aging population and less people paying in.Personally not relying on govt. pension don't expect it to be there when I retire(only 24.5 years),put my serps into private pension still, at least govt. can't get thier hands on all of it.Will look into salary sacrifice when we get there sounds like a good scheme.Thanks Fred

[Guest Pinhead]

It all comes down to whether the government (ie the tax payers) should pay for all, most, a lot or some or none of the pensions of people when they retire or whether the individuals should.

 

It has become clear over the last 10 years that with an ageing population it is impossible for any government to be able to afford to provide adequate pensions for all it's citizens. Targeting the most vulnerable in society is the only way to go for the future I'm affraid.

[Guest BRISSYBOUND]

Dont know about that but there are some very anxious people right now whose super money is in the market and who have seen their pot plummet by thousands of dollars overnight. Without the safety net of the govt pension to support them, they are not a happy little bunch. A whole lot of retirees were so p*ssed off by the recent budget that they demonstrated in Melbourne just afterwards.

 

It's certainly something worth talking to a financial advisor about - salary sacrificing and paying more than the basics is definitely the way to go - just wish we had done it sooner!

Just been reading this post again and realised that Aussies don't have to pay into their own pension,is that right?

[Guest Pinhead]

Yes it is possible to receive a tax free pension in oz from 55 onwards.

[Guest BRISSYBOUND]

Yes it is possible to receive a tax free pension in oz from 55 onwards.

TAX FREE!!! You just mean the lump sum,not the regular monthly payments don't you?

[Guest Pinhead]

Approaching retirement

 

 

 

 

The government wants us to save some or all of our own retirement nest egg, so it provides special tax advantages to encourage us to use superannuation for this purpose. You may now have fewer financial obligations than you did earlier in life - the kids may have left home, you may have almost paid off your mortgage and have less financial commitments. If so there has never been a better time to look at saving more to boost your retirement options.

Tax-free withdrawals from super when you turn 60.

 

 

To encourage you to save more for your retirement, the government abolished its former limits (reasonable benefit limits) on how much you can have in super. You can now accumulate as much super as you like and all of it can be withdrawn tax-free once you turn 60. The only catch is that to prevent abuse of the system the government limits how much you can contribute to super in any one year. The annual limits are:

 

• $50,000 for concessional (deductible) contributions, i.e. employer contributions and salary sacrifice contributions. If you're aged 50 or over, a transitional cap of $100,000 per financial year applies until 30 June 2012 – commencing in the financial year you turn 50. Any contributions in excess of either cap will be taxed at a rate of 46.5%.
  
• $150,000 for non-concessional or after-tax contributions, or $450,000 averaged over 3 financial years if you are under 65 in that financial year. All contributions over the cap will be taxed at a rate of 46.5%
  

Why is super important?

 

The abolishing of the reasonable benefit limits should allow you to accumulate a larger nest egg within super. Australians now have a higher life expectancy than ever before. Current figures show that having reached age 60 the average man will live another 21.66 years and the average woman another 25.44 years1.

Its unlikely that the government age pension on its own will give you the financial freedom you want for your 20 plus years in retirement. The maximum age pension in currently only $13,143 pa for a single and $10,975 (each) for a couple. It's designed to provide a basic subsistence income and most people want a lot more from their retirement years.

Do you have enough super to fund your desired retirement lifestyle?

 

 

To answer this question you need to know two things:

 

• How much annual income you want in retirement
  
• How much super you'll need to produce that level of income
  

How much super is enough?

 

If you already know the annual income you want to receive in retirement (in today's dollars), use our superannuation calculator to work out how much super you'll need to generate that income. The calculator will also work out whether your employer contributions will be sufficient, or if you need to add extra funds to your super.

If you don't know how much income you'll need in retirement, the Association of Superannuation Funds of Australia (ASFA) has undertaken research in this area and has estimated that an individual person needs $35,789 p.a., after-tax, to live a comfortable lifestyle. This assumes you own your own home and budget for items such as $21.36 per week for gifts and/or alcohol and tobacco, $129.91 per week for food and $30.82 per week for clothing.

When can you withdraw your super?

 

The restrictions the government places on when you can withdraw your super are known as the "preservation rules". The preservation rules mean your super balance remains inaccessible, other than in exceptional circumstances such as death or total and permanent disability, until you reach your preservation age (see table).

Your date of birth

Preservation age

Before 1 July 1960

55

1 July 1960 - 30 June 1961

56

1 July 1961 - 30 June 1962

57

1 July 1962 - 30 June 1963

58

1 July 1963 - 30 June 1964

59

After 30 June 1964

60

Source: Australian Taxation Office

Beginning the transition into retirement

 

 

Many people find that gradually winding back their working hours, so as to increase their non-working hours, is a useful way to begin the transition into retirement. If your situation allows it, you may decide to:

 

• Cut back your working hours
  
• Re-train or consider a change of career
  
• Try out retirement part-time before you say goodbye to working life for good
  

A pre-retirement pension can give you the flexibility to organise your transition into retirement in a way that works for you. Learn more about pre-retirement pensions.

 

The above is from the CBA website, unlike the UK you don't need to buy an annuity.

[Guest fatpom]

Just been reading this post again and realised that Aussies don't have to pay into their own pension,is that right?

 

Not really. Your employer deducts 9% from your salary for super contributions.

 

I was running a factory when the figure went from (I think?) a 6% to a 9% super contribution. The boss deducted the extra three percent from the workers wages. They thought they'd just got a 3% wage decrease whilst my boss saw it the other way. It was eventful at work for a while. :smile:

 

So if your future employer states the 'salary package' when offering a job, you must deduct 9% to find 'basic salary'. Always ask if the figure quoted is "package" or basic"... its not uncommon to employers to 'forget' that little detail. :biglaugh:

[Guest Pinhead]

Not really. Your employer deducts 9% from your salary for super contributions.

 

 

 

That's not necessarily the case, my 9% was paid directly by the employer and was on top of my agreed hourly rate.

[Guest BRISSYBOUND]

Not really. Your employer deducts 9% from your salary for super contributions.

 

I was running a factory when the figure went from (I think?) a 6% to a 9% super contribution. The boss deducted the extra three percent from the workers wages. They thought they'd just got a 3% wage decrease whilst my boss saw it the other way. It was eventful at work for a while. :smile:

 

So if your future employer states the 'salary package' when offering a job, you must deduct 9% to find 'basic salary'. Always ask if the figure quoted is "package" or basic"... its not uncommon to employers to 'forget' that little detail. :biglaugh:

Most of the jobs I've looked at have super on top of the hourly rate,maybe I'm just in the right type of job?

[Guest BRISSYBOUND]

That's not necessarily the case, my 9% was paid directly by the employer and was on top of my agreed hourly rate.

So to recap on this pension thing,my employer puts 9% in,I can pay in my own payments before tax up to a certain amount,can draw my pension at 60 tax free and people are complaining,hmm doesn't sound too bad.

[Guest fatpom]

That's not necessarily the case, my 9% was paid directly by the employer and was on top of my agreed hourly rate.

 

So your employer quotes "basic salary" but its important to know that its not always the case.

[Guest BRISSYBOUND]

So your employer quotes "basic salary" but its important to know that its not always the case.

Thanks,I'll watch out for it when we finally get there.

[Quoll]

All depending on how old you are when you start, it wouldnt be a very happy retirement if you just went with the minimum requirements. I worked in the public service and our super was a bit different but I had to pay in at least 3% (I think) on top of what the employer put in. Most people paid in well more than that - 10% was what many folk were paying and the employer had to match that. As I said though, that was one of the old government schemes which now seems pretty much gold plated.

 

I salary sacrifice a lot into super in my new (part time) job because although my govt super is just about enough to live on, I suspect it wont be in another 5 years so I have a second fund going as well and this one is dependent upon the market so I am not a happy little bunny at the moment.:arghh: There is an annual tax take on the contributions but not as much as paying income tax on the earnings. For a while in my last job I was sacrificing 50% of my income into the super fund.

 

I thought there was a limit on the tax free lump sum (used to be about $120k) and there is a small tax take on super (well, there is on mine and I am not yet 60 but when I do hit 60 it will be better although not totally tax free as far as I can gather - it all depends on the original source of the money AFAIK)

 

I think newcomers to Aus would be well advised to get themselves off to a financial adviser virtually as soon as they arrive. I know we regretted not taking more of an interest in our super earlier in our careers. Both of us were on PS schemes which were exceptionally good (now closed!) and so our retirement should be fine but had we made some of the adjustments earlier, we would have been even better off (well, not quite so strapped for cash:biglaugh:) It's one of those things that you really dont think of while you are struggling to pay the mortgage, raise the kids etc but in reality, the earlier you start, the better will be long term outcome.

[Petals]

We were very fortunate when we came to Australia that my husband's job provided superannuation and good super for him and a defined benefit. Defined benefits are not around now its market forces.

 

Financial advisers, before we retired my husband visited many and was totally unhappy with all of them as they told him things he already knew and wanted a big slice of our money annually to look after things so in the end he visited one at an industry fund who told him to look after himself which he has and we do not use them at all. They just sell products and only one product usually. Its really buyer beware and you have to do your own investigations. There are a lot of unhappy pensioners around who have taken advice from financial advisers. No offence to anyone but for me there is not enough control in that area and we look after our own money. Visit many financial advisers and weigh things up. Most will give a free appointment or minimal charge at first.

 

Salary sacrifice is great the younger people are the more impact it has. My son has salary sacrificed since taking his first post as a teacher, however he is not married so its a lot easier for him to do that. Most people with a family would find it hard to do I believe.