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“The retirement outlook due for reality check”

August 30th, 2009 No comments

In his article “The retirement outlook due for reality check” Australian Financial Review (AFR) 22-23 Aug 2009 page 41 Barrie Dunstan writes that Ken Henry is toying with the idea of the government offering annuities by the government in return for handing over the super capital to the government.

Now why would anybody hand over his/her capital for an annuity when that annuity could be swallowed by the meanest “Means Test” that Centrelink applies for an age-pension, which is 50% reduction in Centrelink pension and if the retiree has to pay tax, the total reduction can be $0.815 in every dollar of an income which is barely above poverty level.

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The Great Super Fraud

August 16th, 2009 3 comments

How many people are aware that there are people on super income of more than one hundred thousand dollars and not pay a cent of tax and in case if the income comes from franked shares, they get a nice little cheque of $30,000 from the government for the franking credit; more than what a pensioner couple gets in age pension.

Australia has a three tier social service system, which the Australian politicians claim to be one of the best in the developed world, consisting of a basic means-tested age pension, compulsory super of 9% paid by the employer, but the workers forfeited wage claims for it, and other private savings.

  1.  The means test prevents anybody dependent on a Centrelink pension to raise his/her income from rising to a decent living standard of income. It is considered that a couple needs an annual income of $50,000.00 for a decent standard of living, yet when the total income for a couple reaches $6448 per annum, the means test cuts in and for every extra dollar of income, the couple loses $0.40 of Centrelink pension, and this will increase to $0.50 in September, to where it used to be before the Better Super was introduced.
  2. If most of the private income is in one name of the couple, once the combined income reaches some $40,000.00 per annum, one partner will pay tax of $0.315 including Medicare levy, leaving the couple with the majestic sum of $0.185 for every extra dollar income.
  3. As some 78% of the population who are of pension-age receive some Centrelink pension, they are all affected by the meanest “Means Test” in the developed world and this will continue for the next generation, because according to all Government statistics the majority of the population will not accumulate enough assets through the compulsory super to be independent of the Centrelink pension and will therefore be affected by the Means Test.
  4. Who are the real beneficiaries of the compulsory super? The 20% of the population with sufficient income, not to be dependent on any Centrelink Pension, because they benefit much more from tax concessions than they would gain from any Centrelink Pension. The tax concessions for super almost equal the total cost of the age pension. Approximately $25 billion.

Who owns the majority of Super assets?

Billions of dollars of fees are flowing to financial advisers as they bask in Australia’s growing preoccupation with retirement income from superannuation and other managed funds.
No wonder Pauline Vamos agrees with the ACTU’s call for 15% contribution to super, as reported in Australian Financial Review on the 9’th of June 2009 under the heading “Industry warns of threat to super incomes”.

Do the Super funds work for the benefit of the super contributors?

They have a conflict of interest as they are companies responsible to their shareholders.

As the majority of the ACTU’s members will never accumulate enough assets to be independent of the Centrelink pension, it makes one wonder whose interests are they representing; mostly the leaders, many of who finish up as Members of Parliament on a fat Parliamentary Super.

Data on super assets as reported in Financial Review on page 17 on 9’th May 2006 as applicable to 2002.

Mean value of superannuation

  • Poorest 10% own 0.4 =289 million proportion of total value % =0.000001
  • 2nd 10% 2= 2181 million % =0.4
  • Richest 10% 358.7=343,990million %=57.8

Now Prince Costello has delivered his budget and you can guess which section of the community received the most benefits.

When the Howard government introduced the tax-free super for super paid from a taxed fund, that virtually gave millionaires tax-free income of at times more than $100,000.00 a year.  How can that be justified?

As Australia has a safety net in the form of the age pension for every person of pension age and residential qualification, why should the Government provide the top 10% of the richest people with such extraordinary tax concessions?

If the means test for the age pension was abolished, every person could try and save for a better income in retirement and not having Centrelink look over their financial interests, treating the Centrelink pension recipients like second class citizens.

Questions for the Government

  1. Could you please inform me which government of any developed country means-tests the basic pension?
  2. Which government exempts millionaires from paying tax if their income is derived from a taxed super fund and they are over 60 years of age?

What is your view?
I’am still waiting for an answer to this questions.

This is from the Treasurer W.Swan Blog

[Comment From Patricia]
Mr Swan what about me? I am 63 and work full time and paying my own house off. Your reforms will not give me any more money in my pocket. I will be working forever.
Hi everyone – Wayne Swan here. It’s great to be online to answer your questions about our tax plans for the future.

And Hi Patricia – thanks for your question.

We’ve put in place a very substantial measure through our changes to superannuation which means that people over 50 will be able to make bigger concessional contributions to their super accounts, provided they have a super balance under $500,000.

We’ve done this because we recognise that many Australians may not have had the chance to build up adequate super earlier in their life, but at this stage in their life, perhaps with the kids off their hands, they might have more scope to build up their super to prepare better for their retirement.

That’s a major measure and we’re proud of it.

Mr.Swan.
Can you please inform me where is Patricia going to get $50,000 to put into super as she is still paying off her house?
Does Mr.Swan know what he is talking about?

Home > The Hon Chris Bowen MP
INTERVIEW WITH DERRYN HINCH
3AW
WEDNESDAY, 14 OCTOBER 2009
SUBJECTS: Superannuation system, Superannuation Guarantee, Henry Review, Cooper Review, Age Pension
DERRYN HINCH:
On the line the Federal Minister for Human Services, Financial Services, Superannuation and Corporate Law, Mr Chris Bowen. Good afternoon.
CHRIS BOWEN:
Good afternoon Derryn, nice to talk to you.
HINCH:
I think you are caught in a bit of a cleft stick here and I’ll tell you why. On the one hand you want people to save more, to become self-funded retirees, so they do not need a pension and they won’t be a burden on the tax system, but on the other hand, by making that more attractive, look at all of those billions of dollars in lost revenue from superannuation concessions. Would that be right?
BOWEN:
There’s nothing you say there that isn’t correct Derryn. There are substantial tax concessions for superannuation; about $25 billion a year the Government gives up in terms of tax concessions for super, built as you say, the pay-off for the nation is that people have a much more comfortable retirement income and not on the age pension so that frees up taxpayer funds for other things.
What I said Derryn is that we are all getting older, the Australian population is ageing, we are living longer, and we need to have a discussion about how we are going to put money aside for the future – both as individuals and as a nation. There are a whole lot of mechanisms that we can employ to increase people’s retirement income through super and I think they all should be on the table.
HINCH:
Okay, now this idea of a super guarantee increase – this idea of Paul Keating’s but he didn’t get there – has been stalled for many years on nine. Is it true that you want to get it to twelve?
BOWEN:
No, what I said is that we need to be boosting retirement incomes and that is one of the options. The other option, as you indicated is tax. One of the things I pointed out is that low and middle income earners often left out of this debate. They actually get very few tax concessions for super when you look at how they are treated, because we tax super at 15 per cent, but for 1.2 million Australians that is there tax rate, so it is not concessional. If you are up on the highest tax rate 15 per cent is a very low tax rate in comparison, but if you are already pay 15 per cent anyway then that’s not a tax concession at all. So I’ve said that we shouldn’t forget them in this debate either.
HINCH:
But don’t you want those on higher wages to push more and more into super so they are guaranteed that they will never ever draw on a pension? They pay higher taxes because of their incomes, and by letting them have those concession of 15 per cent and pushing $100,000 – or it’s been reduced to $50,000 now – each year into super, you are guaranteeing that they will never get a dollar from the government.
BOWEN:
Well that is certainly the case in relation middle income earners, you are quite right. When you look at higher income earners they would be very unlikely to go onto the pension, because they would be saving through one mechanism or another. Saving is good for the nation because it means there is that pool of funds available and that has been very useful over the last two years, with for example, more than $1 trillion of money that we have in superannuation and that has been very useful for companies in terms of investment over the last few years. That’s true. But the main focus of superannuation must be to ensure that lower and middle income earners have as comfortable retirement income as possible and if it can be avoided, don’t go onto the age pension. It’s not in there interests or the interests of the economy, more generally, to have more people than necessary on the pension. The pension is there, it is very important, it is a very important policy mechanism to support people, but people are better off if they don’t need to go onto the pension in the first place.
HINCH:
Now Ken Henry, he says that the 9 per cent compulsory contribution would afford a comfortable retirement income. Do you think that is not enough?
BOWEN:
Look, what I say to that is, people have different views about whether 9 per cent is adequate. Let’s have a discussion about whether we can do a bit better than adequate, for people’s retirement. I want people to be as comfortable as possible in retirement. That might mean a bit more than the bare minimum; a bit more than the just adequate. But look these debates will go on and off and it is appropriate that we have a national discussion about what’s the best way to boost people’s retirement income.
HINCH:
Alright, the final question. One of the things that effects people – apart from the fact that we all got clobbered by the global financial crisis and ignored the fact that we all had great returns for four or five years before that – I think one of the things that gets in peoples crawl is that the management funds fees are sometimes absolutely reprehensible.
BOWEN:
Yes, two points there Derryn very quickly. The first point is, that’s right, over the long run returns on super have been much higher than inflation so we are much better off, even though we have had recently these very concerning, negative returns, but your other point is dead right, even a small reduction in fees over the 40 years in the workforce can have a really big impact on their retirement income and I have said that too, we need to be looking at driving more efficiency and putting downward pressure on charges in super, by getting that efficiency in the system. It is still very paper-based, still very complex for people, hard to navigate, and difficult to roll-over when you change jobs…
HINCH:
…and you need to get more transparency in there so people know exactly what their money is being spent on…
BOWEN:
Couldn’t agree more. We need make the system simpler, more transparent, and we have the Cooper review underway to work out the best way to do that. But I agree that that is as equally as important as those other issues we have discussed today.
HINCH:
Alright Mr Bowen, thanks for your time.
BOWEN:
Anytime, good to talk to you
hawilspoint.comA fair go?
Home Contact Home > Pension > ACPSRO Correspondence

ACPSRO CorrespondenceSeptember 4th, 2009 hawil Edit Leave a comment Go to comments
This concerns mainly the members of ACPSRO affiliated Associations; SCOA, SA Superannuants and others.
Indirectly the actions of this Associations affect all the part/pensioners.
To
ACPSRO
19 Drevermann ST
Farrer ACT 2607

23’th.Nov.2008

Dear Sir/Madam.

In the Report ACPSRO held on the 22’nd.Oct.2008 in Paragraph 23.when R.Hickman raised the matter of a universal age pension, the response was as follow:

John Paule reminded the meeting that ACPSRO agreed several years ago that:
(a) we would not pursue any matter outside the interests of our constitution members.
(b) We would not pursue matters that do not have a reasonable chance of success.

As far as (a) is concerned the fact that the majority of the members of the Associations affiliated with ACPSRO on super of less than $30,000 per annum are very much affected by the means test of the age pension, a universal age pension is very much in the members interest.

As far as (b) is concerned, could John Paule inform me and all the members affiliated with ACPSRO what have the Associations under the guidance of ACPSRO achieved in the last two decades?

Yours truly
Hawil
Membership officer

Response to the above letter from ACPSRO

Australian Council of Public Sector
Retiree Organinisation Inc.
Hawil
6.Dec.2008

Dear Hawil,

I refer to your letter of (22’nd Oct.2008), this should read (23.Nov.2008) and I think you may have made a mistake with that reference. Notwithstanding, I have never stated that ACPSRO “would not pursue any matter outside the interests of our constitution members”. The correct interpretation of my reminder to Council members is that ACPSRO agreed not ot pursue any matter that did not benefit the majority of our constituents.

Although a universal age pension might benefit a significant number of our constituents it has no, repeat no, chance of success. It is this latter constraint that decided ACSPRO not to pursue the matter and that’s where it rests. Australia did have (from my memory) a universal age pension many, many years ago but it was abolished by a subsequent Federal Government. There is no bar to having the matter raised again but it has no chance of success with either of the major political parties because of the costs and the current philosophy of user pays and asset/income tests.

For your information ACSPRO fought for and won twice-yearly pension indexation for public sector retirees in most states and the Commonwealth, and we are still fighting for the state holding out. In addition, ACSPRO has been fighting for other improvements for public sector retirees and just because we have had little success does not mean we cease as that plays into the hands of the ruling Government.

ACSPRO does not have an office as such and nothing in the way of assets except a limited bank account. We do not have the resources to conduct correspondence with individuals and, although this may sound harsh, but is not meant to be, ACSPRO prefers to conduct any correspondence with member organisations’ representatives.

Your truly
John Paule
Secretary.

To
ACPSRO
19 Drevermann ST
Farrer ACT 2607
14.Dec.2008

Dear Mr.Paule.

In my letter of the 23’rd.Nov.2008, what I referred to was a report from our two delegates who attended the ACSPRO meeting held on the 22’nd of Oct.2008.

In response to the first paragraph it must be emphasized that a Universal Age Pension would benefit the majority of ACSPRO constituents.

In response to the second paragraph, it can only be said that as long as the leadership has views like “UAP’ has no, repeat no, chance of success”, then it definitely has no chance of success.

Third paragraph; ACSPRO has won “twice-yearly” indexation in some states; how much does that benefit the average members’ say $5.00 per year.

As far as playing into the hands of the ruling government, that is exactly what ACSPRO is doing.

In the last paragraph it is stated that ACSPRO does not have the resources to correspond with individual members; when I suggested to ACSPRO that the affiliation fees should be raised, and it was also suggested by delegate R.Hickman at the meeting, it was not supported, yet our Association wasted $1000.00 on sending two delegates to the meeting, which achieved absolutely nothing.

One proposal to be progressed and have a very good chance of success was to raise the threshold for the “Seniors Health Card” to $60,000 and $96,000, because this would also be supported by the “Poor Self Funded Retirees” through the Australian Independent Retirees Association”.

Now which members of ACSPRO would not benefit from a UAP; a retiree on a defined benefit pension who had sufficient funds to pay into a taxed super fund, a substantial amount who would lose more through loss of tax concessions, than gaining from the age pension.

Maybe ex-Governor Jeffrey would be a point in case in point.

The members of the Associations affiliated with ACPSRO, SCOA, SA Superannuants should ask their leaders whose interests are they representing, the majority on 20-30 thousand super income per annum, and depending on some Centrelink pension, or the members with incomes of $100,000.00 per annum?

No response to this letter so far.

This a submission from SA Superannuants to the Australian Future Tax Review board.

We want to emphasise that our submission is not about escaping the payment of tax and the Medicare levy, or about getting more age pension. It is about paying the same level of tax on the same forms of income, and having income assessed in the age pension income test on the same basis, as other Australians with comparable incomes. We know that receiving our superannuation income as tax-free income would not be fair to members of taxed funds and so we have no quarrel with the fact that our superannuation income is still taxable when that of taxed fund members is tax-free after age 60. It is the extra tax we pay on nonsuperannuation income, and the more severe assessment of our pensions under the Centrelink income test, that are the matters of concern to us.

Excerpt from the SCOA submission
Recommendation 8

a. Commonwealth superannuation pensions paid from an untaxed source be tax free for recipients on reaching age 60,

b. That superannuation pensions paid from an untaxed source be paid as after tax non-assessable income so that they are not added to non-superannuation income to determine the marginal tax rate to be applied to that non-superannuation income.
c. Superannuation payments to Commonwealth superannuants who are married or partnered and who meet that definition as specified in their superannuation scheme’s legislation be able to split equally their superannuation pension with their wife/husband/partner.

Now who would benefit most if the Taxation review board should implement this submissions? Not the low income superannuants.

To
ACPSRO
19 Drevermann ST
Farrer ACT 2607
26’th July 2009

Dear Sir.

In your last letter to me in response why ACPSRO will not pursue an introduction of a Universal Age Pension you stated that a UAP has no chance of success.

In response to the second paragraph, it can only be said that as long as the leadership has views like “UAP’ has no,repeat no,chance of success”, then it definitely has no chance of success.

Here are two excerpts from submissions by SCOA and the SA Superannuants, which will probably have a good chance of success, because all the Politicians and the fat-cats on incomes often above $200,000.00 per annum with a subsequent pension of more than $100,000.00 per annum would greatly benefit from it; who cares about the majority of the ACPSRO affiliated Associations members who according to the SCOA President are in receipt of super pensions equal to a couples age pension.

Unfortunately the membership of the ACPSRO affiliated Associations is not aware of this facts and the leadership of this Associations is hell-bent to keep it that way.

It appears that ACPSRO and its affiliated Associations are the biggest obstacle of a UAP pension, which would the fairest system for the majority of members and also the people in general.

I wonder if the ACPSRO’s leadership will be kind enough to respond to this letter.

Yours truly
Hawil
Ex.Membership Officer
Of S.A. Superannuants

Excerpt from SA Superannuants submission.

We want to emphasize that our submission is not about escaping the payment of tax and the Medicare levy, or about getting more age pension. It is about paying the same level of tax on the same forms of income, and having income assessed in the age pension income test on the same basis, as other Australians with comparable incomes. We know that receiving our superannuation income as tax-free income would not be fair to members of taxed funds and so we have no quarrel with the fact that our superannuation income is still taxable when that of taxed fund members is tax-free after age 60. It is the extra tax we pay on nonsuperannuation income, and the more severe assessment of our pensions under the Centrelink income test, that are the matters of concern to us.

Excerpt from the SCOA submission
Recommendation 8
a. Commonwealth superannuation pensions paid from an untaxed source be tax free for recipients on reaching age 60,
b. That superannuation pensions paid from an untaxed source be paid as after tax non-assessable income so that they are not added to non-superannuation income to determine the marginal tax rate to be applied to that non-superannuation income.
c. Superannuation payments to Commonwealth superannuants who are married or partnered and who meet that definition as specified in their superannuation scheme’s legislation be able to split equally their superannuation pension with their wife/husband/partner.

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