Push for solution to when super runs out
TREASURER Wayne Swan has committed himself to work to remove one of the worst drawbacks of Australia's superannuation system - what happens when super runs out.
TREASURER Wayne Swan has committed himself to work to remove one of the worst drawbacks of Australia's superannuation system - what happens when super runs out. TREASURER Wayne Swan has committed himself to work to remove one of the worst drawbacks of Australia's superannuation system - what happens when super runs out.David Cox of Challenger Financial Services told the Canberra tax summit that an increasing number of Australians were living longer than their superannuation annuities. ''If they have a superannuation balance of $100,000 or so and are prepared to live modestly, it will last a long time. But if they want to live comfortably it is going to run out,'' he said.''The statistics are chilling. Even someone attempting to live comfortably on $500,000 will find it runs out before their life expectancy. The old age pension is not a very comfortable way to spend the latter part of your life.''Most people don't appreciate how long they are going to live. We would like to offer deferred annuities that would kick in after life expectancy, but the rules make it too difficult.''For $10,000 a 65-year-old could buy an annuity that would pay half the pension on top of the pension after life expectancy. Our modelling shows it would save 3 per cent of age pension and age care costs.''Mr Swan said he had heard the discussion and with Assistant Treasurer Bill Shorten would work with the industry ''to do more in this area''.Economic consultant Nicholas Gruen said the planned increase in super contributions from 9 to 12 per cent of salary would make it harder for young people to save the deposit for a house.''It makes sense for people in their 20s and 30s to accumulate savings in the form of a housing deposit. I suggest that at some stage as we increase super we allow withdrawals from funds for housing deposits rather than the kind of Mickey Mouse system we have at the moment, where super makes it hard for people to save,'' he said.Earlier, Grattan Institute economist Saul Eslake turned Mr Swan and Prime Minister Julia Gillard stony-faced when he said the practice of negative gearing transferred $4.5 billion per year from ordinary taxpayers to affluent ones.''But there are now 1.7 million of them, and they vote,'' he added. ''Which is why the subject is off the agenda for both major political parties.''It was not true that the brief suspension of the practice - under which investors are allowed to write off losses made on rental properties against other income - by treasurer Paul Keating in the mid-1980s led to a surge in rents.Nine out of 10 negatively geared properties were existing units or houses rather than new ones. Rather than boost the supply of properties, negative gearing pushed up the price of existing ones. ''The US has never had negative gearing yet they have never had a rental vacancy rate of less than 5 per cent. We have negative gearing and we have never had a vacancy rate in rental properties of over 5 per cent,'' Mr Eslake said.Finance journalist David Koch, who was at the summit as a community representative, said there should be a time limit on negative gearing.