Pension New Rules

Pumpkin_rrr on 03/01/2017 - 08:26

http://www.sbs.com.au/news/article/2016/12/29/power-bill-pet…

Following announcement on the new rules, I am a little weary in planning my pension. We join OzB so that we can save money and improve our net worth. Only to make ourselves ineligible for pension later on?

My older family members, current and deceased, pride themselves for never needed pension. I suspect our generation is different. I don't know many who can self-fund post retirement.

Love to hear the views of this Community as to how well you think your plans onwards retirement, or of those people you know.

Financial

Comments

  • Cheap Steve on 03/01/2017 - 08:50
    +9

    I am torn on these pension changes because it directly impacts my parents and they have just lost a significant amount of age pension which they will now have to self fund.

    On the other hand welfare is easily the biggest budget cost for the Oz government and age pension is easily the biggest piece of this pie (and funded by tax paying workers like me) so it is the most obvious place to start to cut costs. It also helps to know the history of these "new" rules. Back in 2007 John Howard brought the old rules in as a pure vote buying exercise to try and beat Kevin07 in the election. At the time the assets test increase was considered incredibly generous (Oz was in the resources boom so cashed up) so these new rules just bring us back to where we were before now the boom is over.

    From a personal point of view I am targeting a self funded retirement and pretending the age pension doesn't exist. My bigger concern is that new super rules from 1 July 2017 are significantly curbing how much money I can put in to super. You now need to look harder at the outside super investment options.

    • Pumpkin_rrr on 03/01/2017 - 10:34
      +1

      Thanx for writing Steve. Really lost as to how my future would be.

      I am at first day of work so pressed for time. There's a lot I can share about my (short) experience. For now, suffice to say that the government is really not promoting any high-achievers here.

    • dasher86 on 03/01/2017 - 11:11
      +5

      age pension is easily the biggest piece of this pie (and funded by tax paying workers like me) so it is the most obvious place to start to cut costs

      True. But i'm always reminded of the fact that many pensioners worked and paid tax their entire lives hence their entitlement to a pension.

      • [Deactivated] on 03/01/2017 - 11:19
        +4

        And often they are people like my parents who started working and paying tax at the ripe old age of 14!!!

      • [Deactivated] on 03/01/2017 - 17:05
        +5

        Actually, not true.
        https://www.crikey.com.au/2014/05/30/australias-overly-gener…

        Separated from other forms of welfare spending like disability and illness, age pensions reflect less than 3% of our GDP.

        Other 1st World nations spend up to 15% of their GDP on aged pensions. The article explains it much better than I can.

        The Aged Care Pension system is perfectly sustainable as it stands. Politicians are just choosing to make cuts from those who can afford it least first. We could save ten times more in budget by cutting subsidies to multinationals and politicians benefits. Even more. Much, much more.

    • StewBalls on 03/01/2017 - 12:22
      +9

      From a personal point of view I am targeting a self funded retirement and pretending the age pension doesn't exist.

      This is perhaps the best piece of advice for people to consider nowadays, the ongoing changes to rationalise the social security system are pretty scary. I already know struggling retirees who are being forced to jump through unreasonable hoops to meet criteria, getting initial declinatures for stupid things & being forced to fight it out for months or years with no back pay.

      I work in disability, and several of my clients (some of whom have serious impairments which meant they have never been able to work, and indeed may never be able to work, through no fault of their own) are being rather callously booted off their DSP & forced onto the dole.

      My colleagues & I can only presume is some sort of internal cost cutting/cost restructuring measure. This has meant not only a significant drop in income for vulnerable people already at the lower end of the income spectrum; often with high ongoing medical expenditures; but also the imposition of some pretty untenable job seeking requirements for people with significant disabilities.

      If you can future-proof yourself ahead of the axe-wielding greedy politicians, I would highly recommend that you plan for it post-haste! ;)

  • Vampyr on 03/01/2017 - 09:21

    "The amount of assets (excluding the family home) someone can have before pensions are hit is increasing but pensions will cut out more quickly for those with assets exceeding $375,000 for homeowner couples, $450,000 for single non-homeowners, and $575,000 for non-homeowner couples."

    • Pumpkin_rrr on 03/01/2017 - 10:32
      -2

      I dont get this: 375 for couples and 450 for singles? Are we going to see more divorces then???

      • retiredfeline on 03/01/2017 - 10:35
        +4

        Compare apples with apples. Homeowner vs non-homeowner.

        • Pumpkin_rrr on 03/01/2017 - 23:03

          Oops sorry senior moment reading too fast.
          I deserve the neg :-(

        • retiredfeline on 04/01/2017 - 23:44
          +3

          @Pumpkin_rrr: Wasn't my neg though. Easy enough mistake to make. It takes a really idiotic posting to get a neg from me.

  • shaybisc on 03/01/2017 - 09:27
    +4

    Half the public debt is a result of increases over the last decade in net transfers to households aged over 65.
    "Over the last decade the net transfer to each 65-and-over household increased by almost $10,000 per household, while the changes for other age groups were not material."

    John Daley, Brendan Coates and William Young, Age of entitlement: age-based tax breaks, Grattan Institute, Novermber 2016

    https://grattan.edu.au/wp-content/uploads/2016/11/879-Age-of…

    • Diji1 on 03/01/2017 - 09:41
      +4

      Right, the majority of welfare money goes to Australia's middle class which spends most of it's time complaining about how unemployed people far worse off than them are scum because they take money from the government.

      • horice on 03/01/2017 - 10:39
        +4

        Yep while the upper classes are raping and pillaging the country

        make the middle class feel better by kicking the lower classes

        That is what happens now

        Long time since governments have kicked the word egalitarian around

    • RockyRaccoon on 03/01/2017 - 11:48
      +2

      Grattan is flawed and this has been shown before.

      It fails to mention one of the major reasons why Tax for seniors declined is that Seniors depend on income from investments (superannuation) which is proportional to interest rates. With a steep decline in interest seniors income has dropped significantly and with that the amount of tax being paid. Interest rates dropping from 6-7% in the bank to now 2-3% is halving the amount of income received.

      So someone on the government figures of $400K in assets would earn now $12K per year, where 5 years ago they would have earnt $24-30K.

      If you look at their figures in chart 1.3 its the major cause of drop in income and hence taxes since its only income from investments plus pension rather than wages.

      Plus its aggregated by definition since the large majority retire their income drops.

      Just like those 15-24 averages are impacted by students on welfare

      If you want to look at growth in Federal spending. Look at sport in the 70's it was $25 Million, now its around $300 million, and most of that goes to elite sports people who can move offshore and save tax.

      Where is Grattan there?

      http://www.smh.com.au/federal-politics/political-opinion/sto…

      • scupper on 03/01/2017 - 14:28

        Sorry, your example doesn't even address your complaint on Grattan. We could just as well complain that the younger generation has to pay more for property whereas the older already has already bought theirs when the prices were good. There is a proportionality issue on the benefits given to seniors versus the younger demographic. And this is outside of the government having better targets such as tax concessions/subsidies to big business. This government could do better with their priorities e.g. use the 80/20 principle where more savings/revenue can be found from those that can afford it with less impact to most of the population.

        Edit: missing words

        • RockyRaccoon on 03/01/2017 - 16:36
          +2

          Yep the younger generations can pay more. But dont confuse that with the Youngest generations. If you are under pension age you are working so you will pay more tax. Guess what thats what has happend to all generations including the "baby Boomers". Also as children grow up the middle aged will pay proportionally more tax, because they have less deductions and lose child support payments

          On another point, the second world war, was paid out by taxpayers of another generation, likewise so was Vietnam. pensions that those in the 60's got, were paid for by younger generations.

          Why are you paying more for property? Simple supply and demand.

          Plus if you want to live close to the city you will pay more. In the 50's 60's and 70's the inner city suburbs were slums, Tanneries, and other foul smelling factories that are now off shore made them unpleasant places to live, it started in Sydney with Paddington, then the Cross, Newtown, Chippendale and finally Redfern. So the change from blue collar work to fancy university educated white collar jobs changed the demographics of the city, where everyone now wants to live. Yep prices have gone up because many with two jobs are willing to pay.

          Plus while its frustrating, if the market is willing to pay, what can be done other than increasing supply? Do you propose having those in a home already bought earlier must give it up? So this point of yours while concerning and an issue isnt really the fault of a senior person.

          Grattans figures also show that someone who was in the age group 35-44 in 1989 was hit hardest in that group for tax, and those are people who are now in the 65 and above age range. Those joining this age group later pay less tax. So my point is these numbers need to be analysed more carefully.

        • scupper on 03/01/2017 - 19:10

          @RockyRaccoon: Unfortunately, "simple supply and demand" is not correct. You forget the tax incentives given to property investors that artificially encouraged inflation of the prices. Many economists have advised that these incentives be removed, and Labor proposed to do so, but the government won't. No one is proposing homes to be given up, just the tax incentives to be removed going forward. Many analyses have been done (e.g. Henry tax review). It's the government that is too compromised to act for the well being of the majority of the people.

        • RockyRaccoon on 03/01/2017 - 19:50
          +2

          @scupper: No dispute here. The point is that property investors can be of any age. Also negative gearing is of of highest benefit to those paying tax, not something that older people are supposed to be doing. This is according to the Grattan analysis which is what I am disputing.

          Granted that older people probably have more "investment" property - which is a function of their age and savings accumulated over time. 15 year olds wouldnt have been able to save enough compared to someone saving for 50 years. But this is a fact of life, not an attack on the younger generation by the older generation.

        • scupper on 03/01/2017 - 20:01
          +1

          @RockyRaccoon: I'm not arguing for the "baby boomer is killing the future generation" camp, I'm just dismantling the arguments against the Grattan study.

  • grog on 03/01/2017 - 12:25

    Dont blame me i voted labor

  • field1985 on 03/01/2017 - 13:57
    -1

    The pension system is being abused by the baby boomers. They live in million dollar homes while claiming the age pension. The generation before them didn't live long enough to benefit and the following generations are already going to have to work until we're at least 70.
    Meanwhile the baby-boomers, who have had the easiest lives in the history of humanity get to spend the next 20 years claiming a pension that no one else will be entitled to, while clogging up the most valuable real estate in our cities.

    Don't get me started… The baby boomers have screwed every system (tertiary education, negative gearing [housing], howard's tax cuts 90s-00s, blowing the mining boom, climate change, centrelink, etc, etc) after abusing them for their own benefit.

    https://youtu.be/CL7M5RIXjY8?t=1m

    • StewBalls on 03/01/2017 - 14:07
      +3

      Boo-hoo…the baby boomers are to blame for everything…waaaaahhhhhh!

      Don't worry dude, you're not coming across as entitled, immature, jealous, petulant or spoiled at all.

    • RockyRaccoon on 03/01/2017 - 16:10
      +1

      You forget how they supressed the LGBT community, Lowered interest rates, while increased demand for property, shipped jobs off shore, stripped old growth forests, lost the cricket, took the meat out of meat pies , dug up the coal and caused Dick Smith to fail.

      yep lets exterminate them, Hitler and Stalin acheived it so why cant D'Natale, Shorten and Turnbull do the same… ROFL

    • Pumpkin_rrr on 03/01/2017 - 23:12
      +3

      First I must admit I just started to explore this topic now. I can only relate my personal experience.
      I know a widow, husband worked extremely hard to provide for her and kids. He left behind a simple fibro house on a biggish land. When I know her the house was like over 50years old. Very basic. But because of the land and the boom that came later, she would have been classified as "sitting on a million dollar home".
      The whole family never received any pension or other benefits. Not even first home Owners grant due to the time lapse.
      Now compare this to another family of four who don't work and live in government paid home.
      Let me go back to read on pension.

      • shaybisc on 04/01/2017 - 11:35

        She must have considerable assets other than the home because you don't lose all pension entitlement until $542,000 in assets, for a single home-owner. And that's the oppressive soul-destroying new rate. It was $1.75 million + family home and still claim a part pension for couples. Not sure what the old single, homeowner cut off was. Heaps.

        • Pumpkin_rrr on 04/01/2017 - 12:25

          No Shay, I reiterate, she and the husband and family never claimed any pension or benefits.

        • shaybisc on 04/01/2017 - 15:39

          @Pumpkin_rrr:

          That's their own choice then. You can always refuse to claim any entitlement.

        • Pumpkin_rrr on 04/01/2017 - 23:42

          @shaybisc:
          Not by choice. She's not eligible to apply.

        • Baysew on 06/01/2017 - 08:28

          @Pumpkin_rrr: Why isn't she eligible? Is it because of assets or income?

        • Pumpkin_rrr on 06/01/2017 - 08:43

          @Baysew:
          All I can say is the husband and father-in-law worked very hard and probably too mean to themselves.
          The wife and kids are well looked-after after their passing…

  • shaybisc on 04/01/2017 - 07:39
    +1

    "Grattan is in favour of counting the true value of owner-occupied housing in the age pension assets test. In order to protect asset-rich but income-poor households, people could choose to remain in their home and receive the pension but the government would accumulate a claim against the property.

    There is merit to this idea. The purpose of exempting the family home from the pension test is because pensioners need somewhere to live, not to protect one type of asset for the purposes of inheritance.

    Those of us in Generation X and Generation Y are happy to be the tax base for the age pension, because supporting our fellow citizens in old age is part of being in a society. But many of us feel rightly aggrieved that we're supporting property millionaires to get the pension while we can't afford homes of our own.

    I have a huge mortgage instead, which makes me one of the lucky ones."

    Caitlin Fitzsimmons SMH

    http://www.smh.com.au/money/planning/the-truth-about-home-ow…

    • RockyRaccoon on 04/01/2017 - 09:25
      +1

      Why only on age pensions

      If this is a "fair' thing, then all pensions should be asset tested with homes being included in the test.

      This means things like childcare education disablity allowances etc should all be subject to a home assets test.

      Plus while you are at it, gifts by all welfare recipients to other people, also should be included like they are with the aged pension (max of $30K over 5 years)

    • Pumpkin_rrr on 04/01/2017 - 10:54
      +1

      Shaybisc
      Quick reply as I am really busy at 2nd day of work today.
      Regarding your comment on " But many of us feel rightly aggrieved that we're supporting property millionaires", please read my comments above on an elderly widow.

      As for your large mortgage, it may not be you but a lot of Gen X/Y I know chose to live it premium areas and refuse to accept "the second best". They want the bestest and the latest. Our grandfathers had to accept whatever slump they could afford at the time, and paid upto 18% interest, which today worth million of dollars.

  • jhmtaylor on 04/01/2017 - 09:34
    +1

    The following letter to the Australian today sums the issue up perfectly.

    I think his mate was channelling Paul Keating. Paying 1/3rd of the population a taxpayer-funded pension is not sustainable. If you need any proof, look no further than Greece. In Greece the politicians did not choose to cut pensions, the lenders demanded it in return for not declaring Greece bankrupt and the cuts were brutal.

    "A mate told me in 1981 not to expect a pension. He explained: when they introduced the age pension in 1910, there were 30 workers for every pensioner. By 1981, the ratio had dropped to nine to one. By the time we were due to retire in 2019, the ratio would be three workers to one pensioner.

    Add other growing welfare entitlements, government-funded child care and so forth, and we’ve got a budget problem. So I’ve saved, lived within my means, worked all the overtime I could with the thought that I might have to look after myself and my wife in retirement.

    How about having the assets test applied to politicians and public servants on defined benefit pensions. That would be fair, wouldn’t it?

    Andy Sudholz, Rosewater, SA"

  • oldrocker on 04/01/2017 - 10:52

    Read an article in AFR sometime ago, suggesting people spend their $ on principal residence, holidays, all sorts of toys so they qualify for pension!! It's quite irresponsible really, but who doesn't like a holiday?:-)

    • horice on 04/01/2017 - 16:01
      +1

      Like the old Equity Maaate bank ads to load debt up

      • oldrocker on 05/01/2017 - 17:12

        I can see more people moving into more expensive homes, depleting their assessable assets to qualify for full pension! Haha! Maybe time to go on continuous cruises??? Debt or no debt? haha!

        • Pumpkin_rrr on 06/01/2017 - 07:56

          Sounds like an option to me? Maybe i should explore into this area….

        • oldrocker on 06/01/2017 - 09:52

          @Pumpkin_rrr: Many would also bring forward their Bucket Lists !!! spend spend spend…

        • oldrocker on 06/01/2017 - 15:02

          @oldrocker: "Little wonder that some financial experts argue individuals would be better off renovating their homes, buying fancy cars or blowing cash on overseas holidays than saving hard for retirement"…From a news article. That's one way of boosting the economy I suppose!!

  • oldrocker on 06/01/2017 - 16:09

    Understand the architect of these changes is a certain bloke…

    https://www.google.com.au/amp/s/amp.dailytelegraph.com.au/ne…

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