Superannuation Discussion + market volatility

[CaptJCool]

My pension super fund hit its most recent peak in early January and as at today is down 7.2%

So what should I do - ride it out or go to cash? I have a friend who went to cash in Feb 2020 and was very pleased with himself as the markets tumbled in March / April 2020. He kept telling me I should have listened to him but then he missed the rapid rise in 2020 and is still in cash. Because of monthly pension payments his fund balance is now much lower than when he first went to cash in Feb 2020. Despite my monthly pension payments my balance is now much higher despite undergoing whiplash in 2020.

Each to his own but most of the investment mistakes.....

in light of my earlier post about cash and investment rates over the past decade for my fund (2011-12 to 2020-21), its a no brainer,


Sometimes it’s a case of “can‘t see the wood for the trees”

I am ever grateful for the Amazing boost up from 1988-92 from the share market proceeds where earning rates year to year were in the range 18-23%. Prior to then super funds “had to invest” in govt bonds (in effect cash) earning say 3-5%. The table above tells us cash will simply not deliver sufficient earnings to sustain the capital available to fund future pension requirements, and a good inheritance for the children.... UNLIKE your cash only friend and their severe depletion of the capital lump sum resulting in much lower inheritance.... (PS And your Mr/s Cashman friend ought be truly grateful for the SAFETY NET of Age Pension!)

 

[drron]

Today and tomorrow I am doing what retired old farts with an SMSF do.I am at an investment conference on the Gold Coast. Twenty or so ASX companies doing their best best to convince us their shares are worth buying. The presenters are almost unanimous that we are close to the bottom but us old farts don't see it that way.

One old fart had compared Sydney real estate prices to those in Tokyo in 1989. Believe it or not they are higher in Sydney now than Tokyo then. And the Nikkei has yet to make it back to the highs of 29/12/1989.

I also sometimes read John Hussman who is more right than wrong in his predictions. He thinks the S&P500 could drop 60% to take it back to normal values. So that is the broader market not the usually quoted S&P 200.

And if the US goes down so will we.

 

[CaptJCool]

Finally the March 2022 Age Pension figures have been published by DSS Demographics

Fortunately in the same period the electoral roll stats came out so I was able to check the population figures and I was within 10,000 of the 3,797,000 enrolled voters over 66.5 (a bit of scientific calculations to work out of the age band how many are in/out but not needing to worry about death figures)

now just under 1/3 of senior Australians are Self-funded. Also interesting to note is 2.026 million of the 2.554 million pay NO RENT and just 110k in govt rent, 24k in housing orgs, while 271k in the private rental market (also reflected in the voting patterns in northern NSW and QLD....)

the downward trend continues albeit slowed as those who just turned 66 on 1 July 2021 had to wait 6 months before being eligible, so there was a 6 month backlog....

of course the inevitable push-up of age pension age is still in transition so keeps half a million people out of eligibility for 18 months and two years from 1 July 2023

reliance on Age pension will I expect continue to dampen except where people apply later in life like say late 70s to early 80s when their superannuation lump sums exhaust. Would also note for those over 90, my estimate is over half are not on age pension. Those who are surviving spouses have lower asset test thresholds AND Double The earlier income thus seeing them leave the Age Pension but still eligible for the CSHC (ADJUSTED) taxable income soon to rise to $90,000 for individuals)



A new table is now published too, which splits people by age range. When the Census 2021 figures drop this coming week on 28 June, I’ll update this next table with percentages for each Age Range.



finally the Country of Birth data is now showing obvious trends for the immediate post war migration crowd
and more recent migrants on the up. I made a 5 year calculation from December 2016 data that really shows this picture especially well...



Reference Search

DSS Payment Demographic Data​

 

[CaptJCool]

Census 2021 data has arrived!





Super making its impact!

 

[Rnwillia]

The superannuation rort has been a nice little earn for some financial advisers thanks to suckers like me.

I worked for a company between 2003 and 2005 and the superannuation funds were with Colonial Mutual. When I left the company the superannuation funds were then transferred from the company superannuation account to Colonial Mutual superannuation account. That was over 10 years ago.

Fast forward to today and I look at superannuation account to find the balance has decreased from previous year. Why? Only 0.28% growty for the year. Ok so why decrease in balance? Not only are they charging me an administration fee but they are charging me a financial adviser fee. A financial adviser who I have never seen or spoken to ever and they have been taking a cut from my superannuarion. Seriously?

Called today and was told that I needed to call Colonial Mutual to remove the financial adviser from my account. Seriiusly? Yes I know I should have noticed earlier but whst a nice little rort going on there. Why aren't these things audited?

Asked for exit forms. The consultant couldn't care less and emailed me the forms.

I'd hate to think how much superannuation I have wasted in useless fees. If there are no contributions to a superannuation account they shouldn't be charging admin fees. What are they doing that requires a fee to be charged?

Now what? Think my daughter is going to be angry with her dads carefree attitude to money.

Ring the Ombudsman and you should be able to get all that money refunded.

 

[Flashback]

Ring the Ombudsman and you should be able to get all that money refunded.

For what?

 

[tgh]

For what?

Indeed…All @JohnK's fault.. dreaming while the mice played in his larder

 

[SydneySwan]

Census 2021 data has arrived!

View attachment 283309

View attachment 283310

Super making its impact!

I assume that the % on the age pension must include both full and part pensioners.

 

[CaptJCool]

I assume that the % on the age pension must include both full and part pensioners.

Yes

full paid age pensioners around 1.7 million

 

[OATEK]

Ring the Ombudsman and you should be able to get all that money refunded.

For what?

Each time I log into my super account there is a little message pops up to say they have been very naughty by charging advice fees without actually giving advice. Seems to me @JohnK has a case if no formal advice received.

 

[SydneySwan]

Perhaps @JohnK can snag a spot in the "Compare the Pair'' series of ads?

 

[tgh]

Sometimes I find stuff that is terribly depressing and one wonders how the US (and us as their associate) can survive…..

“U.S. public pension funds don’t have nearly enough money to pay for all their obligations to future retirees. A growing number are adopting a risky solution: investing borrowed money. As both stock and bond markets struggle, it’s a precarious gamble. More than 100 state, city, county and other governments borrowed for their pension funds last year, twice the highest number that did so in any prior year, according to a Municipal Market Analytics analysis of Bloomberg data. Nearly $13 billion of these pension obligation bonds were sold last year, which is more than in the prior five years combined.”

 

[JohnM]

Sometimes I find stuff that is terribly depressing and one wonders how the US (and us as their associate) can survive…..

“U.S. public pension funds don’t have nearly enough money to pay for all their obligations to future retirees. A growing number are adopting a risky solution: investing borrowed money. As both stock and bond markets struggle, it’s a precarious gamble. More than 100 state, city, county and other governments borrowed for their pension funds last year, twice the highest number that did so in any prior year, according to a Municipal Market Analytics analysis of Bloomberg data. Nearly $13 billion of these pension obligation bonds were sold last year, which is more than in the prior five years combined.”

I think (suspect) that most of those are defined benefits schemes and those government agencies have not moved to accumulation superannuation schemes as happened here 30 years ago. I think US universities are in a similar situation.

 

[CaptJCool]

I think (suspect) that most of those are defined benefits schemes and those government agencies have not moved to accumulation superannuation schemes as happened here 30 years ago. I think US universities are in a similar situation.

Yes

Kiss Your State Pension Goodbye

When Kentucky senior Senator and Majority Leader Mitch McConnell said this week that he would be in favor of allowing states to use the bankruptcy route to deal with their underfunded public pensions amid the pandemic emergency, state workers and retirees—already struggling with the economic and ...

www.forbes.com

 

[coyote25]

I think (suspect) that most of those are defined benefits schemes and those government agencies have not moved to accumulation superannuation schemes as happened here 30 years ago. I think US universities are in a similar situation.

Worse when then are unfunded defined benefits schemes or partially funded defined benefits schemes.

Even those that should be fully funded used ‘heroic’ earning forecasts to allow lower contributions from the employer (Fed, State, Local Government, Universities and private employers). Most of these are ticking time bombs.

In Australia almost all defined benefit schemes where closed to new members a while back. Vic Government retrospectively cut some benefits to limit liabilities and close to new members, Federal Government sold Telstra and moved most of proceeds in the Future Fund to cover the Federal unfunded benefit benefits schemes for those who joined before it was closed for new members.

That leaves the majority of super funds in accumulation style and the % increases as people in the old defined benefits schemes/funds die off (plus more people everyday join the accumulation super fund schemes).

The world has some serious issues for retirees either due to unfunded benefit schemes / funds or generous (sometimes not so generous) Government Age Pension schemes that very few Governments put aside funding for.

It’s a big issue. While there are issues with the Australia system, mostly due to super fund account balances being lower for those who worked before compulsory super got to 9% (to be 10.5% from Friday) so they didn’t benefit with full working life of accumulating superannuation at reasonable rate (worse for those with broken work patterns), 85% of Western countries are facing a lot worse.

Poverty in retire is very undignified

 

[CaptJCool]

Yes

full paid age pensioners around 1.7 million

View attachment 283336

And following on from this

have done a COB Analysis which isn’t straightforward seeing the official figures have not been released but can be found suburb by suburb ....

 

[andye]

Agree the Australian super/pension situation is one of the best worldwide
It's a shame we havent managed to keep up high levels of home ownership for those retiring in coming decades

 

[CaptJCool]

Agree the Australian super/pension situation is one of the best worldwide
It's a shame we havent managed to keep up high levels of home ownership for those retiring in coming decades

Sorry to burst your bubble
the 2021 Census saw the % go up 0.5% and An additional 693,865 home owners...




in 2016
92% of older couples OWN a house
75% of singles OWN a house

who will own these houses when they die?
and we know from Age pension stats over 2 million pay NO rent While over 1.8 million OWN Their own house

 

[andye]

Sorry to burst your bubble
the 2021 Census saw the % go up 0.5% and An additional 693,865 home owners...

View attachment 283513

That's genuinely interesting but we are surely nearing a peak.

I deal with a lot of older people and currently you have to have had a pretty tough life to not be a home owner.
However, even lots of professionals in 40s are now struggling to get on ladder.

Take your point about houses passing on, but migration means an expanding population and policy is likely to continue to support the rental sector

Do hope my bubble stays burst as think it would be great for Australia if we can have a strong super system and high ownership.

 

[CaptJCool]

That's genuinely interesting but we are surely nearing a peak.

I deal with a lot of older people and currently you have to have had a pretty tough life to not be a home owner.
However, even lots of professionals in 40s are now struggling to get on ladder.

Take your point about houses passing on, but migration means an expanding population and policy is likely to continue to support the rental sector

Do hope my bubble stays burst as think it would be great for Australia if we can have a strong super system and high ownership.

Well we can both be right,,,,,,

it shouldn’t need a reliance on parents assets to stay afloat bearing in mind the baby boomers were the first generation to have say 2 offspring not 4-5 and have both working parents...

the challenge is lifetime low income earners are rarely placed to achieve a strong superannuation because they don’t have the payday to payday income to deliver that windfall.




Nor as result can they earn the kind of $$$ after finishing up a working life.

the current model relies severely on home ownership and so it stands to reason that while the % may not alter much, as the baseline grows, there in absolute terms is a higher volume of long-term post working renters UNLESS you consider the over 55 retirement village model that offers home ownership at a quarter of the price of the open market...which means it’s affordable to all comers over 55.....

governments simply don’t have the cash to splash (we tried that and now got a trillion dollar deficit to show for it) and most things announced and dressed up as “new” are really ways to constrain expenditure (eg raise pension age from 65 to 67 and before that raise women’s age pension age from 60 to 65)