Letters of the Week

Going into pension mode, the gold write-off, and use it or lose it.

Going into pension mode

In his recent article Labor’s super scramble not overcooked, Robert Gottliebsen makes the unsupported statement: “If you are aged 55 or above you should consider very seriously putting your superannuation fund into pension mode.” I was hoping that Robert could clarify why he makes this statement.

I am of the view that the recent Labor proposed changes to superannuation legislation are largely irrelevant (and are not legislated) as the odds are that Labor will not be re-elected. The real issue is what the Liberals policy is on proposed changes to superannuation legislation.


Robert Gottliebsen’s response: “Thank you for the email. You are, of course, right that we may have a different set of policies assuming the Coalition wins. So we have three alternative situations:

1) Things are left as they are now. My advice to go into pension mode will be the right one, unless there are special personal situations. Of course, each person is different, so I am giving general advice.

2) The Labor proposals are introduced. The above applies, except that the tax-free amount is confined to $100,000 of income per person. However, some may prefer to pay tax on all profits rather than be forced to pay tax in pension mode.

3) There is a totally new situation when the Coalition is elected. There is no evidence they are going to attack superannuation people.  But people who are not in pension mode pay 15% on all earnings. In pension mode the tax is is nil, but you must make regular pension payments. If that strategy is the right one for you, then doing nothing because the Coalition might change the rules is not a call I would make. Nevertheless, you are quite right that it represents an uncertainty.

The gold write-off

I find it interesting that gold is being written off so easily and so quickly in an environment where most of the world’s major currencies are being actively debased by their respective central banks. Gold dropped by over $ 200 an ounce within a day or so – a very significant fall and also to a significant technical point to below the 200 day average.

Many reasons were given but none of which could be the cause of such a sell-off in its own right. I would suggest that the cause of the sell-off is a large seller of gold, whether by physically selling the metal or much more likely be a very aggressive short selling exercise. I doubt that any well-known speculators or hedge funds would have initiated this, the market would know they would have to cover the position at some point. I suspect that the seller is a central bank needing to keep the relationship between the fiat currency they are manipulating and an undeniable measure of that currency’s value. Central banks have the motive and access to gold reserves the quantity of which is not in the public domain, and therefore are in a position to act accordingly. I think it would be good for Eureka to investigate this aspect as it would put the sell-off into context.


Use it or lose it

As always, I enjoyed Bruce Brammall’s article ‘Contributions capers: Another year, another change‘. However, when he writes “Simply: If you are over 60 and able to make concessional contributions to super, you will have a new limit of $35,000 from 1 July onwards. Use it or lose it.” – I suspect that Bruce forgot to add a caveat to this (and other) bits of advice: Only if legislation cover exists!

Personally I think legislation cover by July 1, 2013 is highly unlikely – Labor has too many other big crocodiles to deal with/avoid before the election.


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