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The Forum > Article Comments > The superannuation revolution > Comments

The superannuation revolution : Comments

By Everald Compton, published 18/6/2015

So, paying a part pension to people who have inadequate superannuation will become an extravagance that Australia can no longer afford. It will have to cease until they qualify for a full pension.

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I attended the Per Capita function addressed by Paul Keating as described in the article. The aim of universal superannuation has a "feel good" attribute but it is wrong in accepted economic understanding. If everyone attempts to save the total economy suffers.

I submitted the following to a Senate Inquiry about 15 years ago.

"With an aging population it must be remembered that the real future problem is the distribution of goods and services between the various age groups existing over time periods in the future. The problem cannot be solved simply by creating cash savings now. Such savings to date have mainly led to the creation of massive financial institutions manipulating funds in the stocks and bond markets.

Competition for assets in this scenario will, and has already, led to inflation of asset values and is one factor forcing the price of homes up out of the reach of ordinary single income families particularly in major cities such as Sydney. (Another major factor is competition from the excess savings of overpaid executives and professionals as these groups seek safe havens for these savings).

The future working population will need to be exceedingly efficient in producing goods and services if the limited working population is to produce sufficient to satisfy their own needs and desires and the products required by the non-working aged and infirm.

Savings now, in the form of superannuation contributions, only make sense if those savings are directed to making future production efficient. This is difficult as the future is mainly indeterminable and we do not know largely what physical products will be required although health, education, police and defence and similar services are probably predictable.

Future working populations will resort to inflationary tactics if they are not satisfied that their share of then current production is a fair share and that the asset richer older groups are being exploitive.
Posted by Foyle, Thursday, 18 June 2015 8:33:03 AM
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An interesting juxtaposition isn't it Everald?

On the one hand folks with more than a million in salable assets now denied any more tax payer assistance!

However, even richer folks on the top tax rate, helped to reduce their tax by 33%, making their effective tax rate 15%, courtesy of the taxpayer!?

With the net effect, a huge reduction on the budget bottom line! And soon it will cost that budget bottom line more than pension outlays!?

Sure people need to save toward their own retirement, and wherever possible, must be compelled to do so!

And given compulsion, enable the ultra costly tax incentives/tax havens to be removed!

As opposed to hissing large slabs of disposable income up against the wall! Which nonetheless, should only ever available as an annuity that survives as long as the superannuate!

And I see nothing wrong with the first 75,000 dollars P.A.,remaining untaxed!

And only fair given one has paid their fair, full and due share of tax, even while saving for their own retirement!

And while we're talking about what has now become effective onshore tax havens, why not comment on negative gearing, and family trusts soon?

I mean, one could be forgiven there was no structural deficit; and or, debt and deficit going out as far as the eye could see?

For mine, folks would be far better served by genuine tax reform that could more halve their total tax! And then only imposed with their expenditure!? And made more palatable with half priced power!

Which would impact positively on every aspect of essential expenditure and or commercial outlays!

A better outcome than dodgy tax deals/arrangements that can change with every government; and doable, just by making ALL tax avoiders pay a fair and measured share and resuming government core responsibilities!
Posted by Rhrosty, Thursday, 18 June 2015 12:04:13 PM
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Foyle, we face a future where robotics will eliminate around 50% of today,s jobs, in as little as 40 years!?

And given folks bet hundreds on such as the outcome of a game; and with offshore establishments, it may be a better bet if they are compelled to save this, [wasted in every sense of the word,] money toward their own retirement.

And if you want to boost the economy and job provision here and now, nothing would guarantee that more than the reduction in the cost of the essentials; with power at the top of a costly list that could be halved, with the right policy paradigm!

And coupled to genuine tax reduction made possible by long overdue reform and simplification!

Enable a non contributory compulsory super of not less than an affordable 15%; as well as a significant lift in discretionary spending!

Which seems to be the focus of your concern?

And returned as a largely tax free, whole of retirement annuity, rather than a lump sum able to also be hissed up against some wall!?

Enable those displaced by technology, to at least eke out a retirement in comparative comfort, and indeed, contribute positively to the wider economy.

We need to rethink the role of us and our economy, which must be made to serve us, rather than the reverse; which seems to me, to be where you are coming from?
Posted by Rhrosty, Thursday, 18 June 2015 12:36:31 PM
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Superannuation is a disaster.

It is based on the assumption that ordinary working people are irresponsible and cannot keep their own savings for winter unless they are locked away remotely in a complex structure at the hands of greedy and scheming fund-managers.

Government could instead stop discouraging savings for old age, if only they stopped taxing the nominal inflationary component of investment-"income" (yet naturally tax the rest just like any other income). Why would someone want to save rather then spend all now if they know that the purchasing-power of their savings will keep decreasing over the years through no fault of theirs?

And if your motive is not to give age-pensions, then don't hide behind the bush and just don't give them: decent conscientious people should not accept government-money anyway.
Posted by Yuyutsu, Thursday, 18 June 2015 12:57:15 PM
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Only half the job is done, the bit the Libs are stitching up together with the Greens, then capping tax concessions to the first 75K, say, of earnings, which Labor advocates (and so do the Greens, I'd venture). Costello was way, way too generous to the big end of town, and that needs paring back through new taxation legislation.

The only fair alternative to all of the above is to remove the perks of personal super and return to taxing the population enough to give everybody the same Stae pension at whatever is determined as retirement age.

I say all of the above as I arrive at retirement age myself, to be slugged by the impending changes and not understanding how Costello's largesse remains to benefit the seriously wealthy by the continued limitlessness to income without taxation past the age of 60. Why did the LNP oppose changes to this before its election, and why so now?

I have heard it argued that the wealthy would simply move their money out of super if the tax regime changed. Well what would be the tragedy in that? At the moment Australia receives no income tax from the retired over-sixties, even the highly wealthy, thanks to Costello. If exploring loop-holes in the wider taxation system then beats a 15% tax on earnings beyond 75K, then good luck to them.

If nothing is done, the devolution of the tax base away from income tax will be the only way to capture funds from high wealth retirees, before they pass on vast wealth to their children, dividing society further. Unfortunately, that will slug poorer retirees too.
Posted by Luciferase, Thursday, 18 June 2015 4:14:30 PM
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I was appalled in reading this article by the way the author started out with the extremely well designed long term plan of Keating in 1990 but virtually in the same paragraph injected his own NON supported analysis of "the sky is falling in" hype.

That hype is par for the course and we are fed it on a daily basis by the media from BigSuper (ie which includes the govt), but my objection is the author has mixed that in with Keating himself as if to say the hype was FROM Keating.

All it takes is a bit of skill with a spreadsheet to find the truth in Keating's plan which says that the Age Pension total of some $40 billion pa will start from 2015 to REDUCE to almost zero in 2030, based purely on employer contributions.

Of course people DO put their own money into super so that can only improve the situation.
Posted by LittleOzemailPensioner, Saturday, 20 June 2015 10:58:19 AM
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