Super landscape has changed
In response to Alan's article about the super system being a disgrace (originally from 2012 [linked in last week’s Saturday email]) l would suggest a few things have changed. Firstly all super funds now declare full dollar costs on annual statements so it is no longer the case that you can't easily locate what you pay in total fees (there is one figure there in black and white.) Secondly, many default options in larger public offer funds are now age based thus affording better protection for members as they near retirement (this was one of the major problems post GFC.) Thirdly, MySuper legislation has capped/reduced fees for many members in public offer funds, and for many funds that move has been extended into their retirement income phase/offering.
Minimum pension rates key
I am having a hard time coming to grips with the budget changes and the minimum pension payable. Under the budget, the maximum I can have in my pension account is $1.6m as of 1 July 2017. For retirees with more than $1.6m as of 1 July 2017, this limit severely disadvantages them because they have already reached the maximum allowable and regardless of what happens in the future, it can never be topped up. So if we experience another GFC and that pension account balance drops to $800k it can't be topped up. Which brings me to my second point: the minimum pension payable.
No matter what you read or where you look, we are being told to expect lower returns going forward and that a 5% pa return should be considered as good. Interest rates at 1.75% and going lower, term deposits at between 2.8 and 3%, government bonds at 2.2%. It's not good and as we get older we place a higher emphasis on capital preservation which means more and more in cash and fixed interest.
With a pension account cap we can't add to, low returns for the forseeable future, we desperately need the minimum pension rates lowered otherwise we will end up chewing our capital and have to rely on the age pension.
The Government of the day made an exception during the GFC, why not now? Retirees are being attacked from every direction, it's time to fight back.
Surely with an election coming up there has never been a better time. We need the minimum pension rates reduced.
$500k cap affects many
Thank you to Max for his clarification relating to the new super caps.
I have previously submitted some (adverse) comments in respect of the $500k cap on non-concessional contributions and the fact they include such contributions back to 1 July 2007. I would like to follow with these brief remarks/requests:
1. I don't have any argument with the proposed tax on earnings from accounts over $1.6m per member. I think that's probably fair.
2. Would someone with influence in your organisation please draw attention to the fact that the $500k cap IS retrospective and DOES affect people (such as my wife and I) who are nowhere near $1.6m and because they have already used much of the $500k in recent years are effectively limited to a much lesser amount? They are not "plain greedy" as described by David Marr (on Insiders last week) and Jon Faine on ABC radio when talking to Marcus Padley last week! Someone who understands this needs to tackle the PM and the Treasurer regarding this and correct the commentators like Jon Faine and David Marr.