Superannuation Discussion + market volatility

[love_the_life]

There will be about 2 million Australians caught if the opposition leader knocks out franking credits in the format he plans.
It could hurt lots of mum and dads who need that money to live.

I am sceptical of the numbers being bandied around and the assertions that people won't be able to live but not getting into a discussion as I know many have different views and have set up their SMSFs to take advantage of this loophole/strategy.

 

[burmans]

If you have franking credits and get refunds you might want to sign the document being circulated by Wilson Asset Management.
Let the current opposition leader know what you think about his plan to snaffle your retirement money that comes from franked dividends.

As someone who is close to retirement I'm in the category of people who will be (negatively) affected by this decision. But I won't be signing the petition.

As to why. Well John Howard brought this in, well clearly at that time I thought I could leverage it and was happy to, but from an equity point of view I thought that any policy which benefitted baby boomers at the expense of the next generation was clearly inequitable and as such poor economics and policy. Why should we be taxed at zero percent when everyone else isn't? And then adding on the idea that not only are we taxed at zeo but then we get franking credit back on top put this into the category of something that would eventually need to be reduced/unwound.

While I get the anger that people have relied on this and now its being unwound, this policy (and a few others Bill Shorten is going after) were always poor economic policy, political pork-barrelling and not ecomocillay sustainable. As such I've always thought they would eventually be unwound and have not based my retirement plans on them being around for ever.

 

[tgh]

It's true that smsf's in pension mode are, arguably, over generously protected from taxation, but throttling the retirees who simply planned their retirement around the existing rules, is asking for a backlash.

Once upon a time… pollies avoided retrospectivity.. because it tends to cause great harm and angst.

Reverting to effective double taxation for super funds is perhaps the first move in a socialist plan to double tax all dividends; back to the good 'ol days….

.

 

[Pushka]

It's true that smsf's in pension mode are, arguably, over generously protected from taxation, but throttling the retirees who simply planned their retirement around the existing rules, is asking for a backlash.

Once upon a time… pollies avoided retrospectivity.. because it tends to cause great harm and angst.

Reverting to effective double taxation for super funds is perhaps the first move in a socialist plan to double tax all dividends; back to the good 'ol days….

.

Indeed. Rules have already been changed significantly just at a time when we could afford to pay extra contributions. That was thanks to Turnbull. All we are trying to do is salvage a reasonable retirement after paying a lifetime of taxes and not attach to the pension. But it seems that Labor would have us not qualifying for the pension but live off our own means at slightly above pension lifestyle.

 

[love_the_life]

Indeed. Rules have already been changed significantly just at a time when we could afford to pay extra contributions. That was thanks to Turnbull. All we are trying to do is salvage a reasonable retirement after paying a lifetime of taxes and not attach to the pension. But it seems that Labor would have us not qualifying for the pension but live off our own means at slightly above pension lifestyle.

But would you qualify for the pension in a Lib government?
We have no chance of that. Our super has been moved into industry funds to make sure we get the best we can. It meant we didn't go for a SMSF at the time we had the company and also we have divested of all our shares over the past 10 years.
I see why people are annoyed and think a grandfathering arrangement is an option but I don't see why people who have super funds in the millions should get money back on tax they didn't pay in the first place. How much money do people need to live on? We had to alter accounts in the last lot of government changes - but I must admit I personally came out on top as MrLrL had to move money to me

Oops - said I wasn't going to comment People should make their own political/financial decisions - not for me to comment.

 

[Pushka]

But would you qualify for the pension in a Lib government?
We have no chance of that. Our super has been moved into industry funds to make sure we get the best we can. It meant we didn't go for a SMSF at the time we had the company and also we have divested of all our shares over the past 10 years.
I see why people are annoyed and think a grandfathering arrangement is an option but I don't see why people who have super funds in the millions should get money back on tax they didn't pay in the first place. How much money do people need to live on? We had to alter accounts in the last lot of government changes - but I must admit I personally came out on top as MrLrL had to move money to me

Oops - said I wasn't going to comment People should make their own political/financial decisions - not for me to comment.

Nope, no Government. Agree about the millions in Super but we are millions short of that! Its going to create a new breed of poorer self funded people.

 

[love_the_life]

Nope, no Government. Agree about the millions in Super but we are millions short of that! Its going to create a new breed of poorer self funded people.

That why I think some kind of grandfathering for those who are not in the super rich category would be a good idea.

Edit - but the concept needs to be considered IMO (added later so may affect reactions to post)

 

[burmans]

Reverting to effective double taxation for super funds is perhaps the first move in a socialist plan to double tax all dividends; back to the good 'ol days….

That's just a bit of hyperbole, even with Labours proposed changes people in pension mode are considerably advantaged over your average Joe Blow working person.

While I understand the argument around retrospectivity I'm still of the belief that bad policy is bad policy and should be changed. Benefits to one group of people always comes at a cost to the rest, in this case we are asking our childeren/grandchildren to bear the costs of some misguided economic policies which advantage us as retirees (or in my case soon to be). Regardless of my personal situation I can see this is not and was never fair. Some sort of transition may be fair but frankly I think we all need to recognise this was never sustainable and when thats the case governments need to make adjustments.

Governments can't just make popular decisons every time, thats as recipe for disaster and frankly is the cause of far too many of our current problems. This is true not only on OZ but overseas also, bad populist decisions of previous goverments always come back to haunt us.

 

[Flying mermaid]

As someone who is close to retirement I'm in the category of people who will be (negatively) affected by this decision. But I won't be signing the petition.

As to why. Well John Howard brought this in, well clearly at that time I thought I could leverage it and was happy to, but from an equity point of view I thought that any policy which benefitted baby boomers at the expense of the next generation was clearly inequitable and as such poor economics and policy. Why should we be taxed at zero percent when everyone else isn't? And then adding on the idea that not only are we taxed at zeo but then we get franking credit back on top put this into the category of something that would eventually need to be reduced/unwound.

While I get the anger that people have relied on this and now its being unwound, this policy (and a few others Bill Shorten is going after) were always poor economic policy, political pork-barrelling and not ecomocillay sustainable. As such I've always thought they would eventually be unwound and have not based my retirement plans on them being around for ever.

and yet Paul Keating when it was brought in (refunding of the franked dividends) said he supported it and it was a logical extension of the imputation system he had brought in.

Tax laws change all the time, but when it was changes affecting retirees it used to be grandfathered. There was a recognition that people who had relied on a certain law before retiring, should not be affected and it should only be applied to people who still have the ability to make up for the change. No one seems to care about retrospectivity anymore.

 

[Flying mermaid]

Nope, no Government. Agree about the millions in Super but we are millions short of that! Its going to create a new breed of poorer self funded people.

Agree - the really wealthy people are going to rearrange things so it will have minimal impact.

 

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[burmans]

and yet Paul Keating when it was brought in (refunding of the franked dividends) said he supported it and it was a logical extension of the imputation system he had brought in.

Tax laws change all the time, but when it was changes affecting retirees it used to be grandfathered. There was a recognition that people who had relied on a certain law before retiring, should not be affected and it should only be applied to people who still have the ability to make up for the change. No one seems to care about retrospectivity anymore.

Yes, I was aware Keating supported it but both side of politics can equally make mistakes. My comments should be interpreted as a commentary on bad policy rather than an attack on the Liberals, I'm equally prepared to criticise bad policy regardless of who created it.

I'm ambivalent on retrospectivity. This reluctance to address previous bad decisions is one of the main factors in both the overcomplication of many of our laws with all these rules excluding certain transactions based on their timing, which in turn leads to considerable inequity accross our political system.

 

[andye]

It does seem to be peculiarity of Australian politics that any time there is a change in taxation or other fiscal policy, there is a call to compensate all those negatively affected (even when the change is designed to alter behaviour).
In this way, laws seem to be a 'contract' without an end-date.

As things stand I'm sure I would do very well from franking credits in retirement. Nevertheless I'd personally favour some sort of capping of benefit, so that retirees who need the credits as income to live on don't lose out but credits are not used as a way to augment wealth generation/estate planning.

 

[Flying mermaid]

Yes, I was aware Keating supported it but both side of politics can equally make mistakes. My comments should be interpreted as a commentary on bad policy rather than an attack on the Liberals, I'm equally prepared to criticise bad policy regardless of who created it.

I'm ambivalent on retrospectivity. This reluctance to address previous bad decisions is one of the main factors in both the overcomplication of many of our laws with all these rules excluding certain transactions based on their timing, which in turn leads to considerable inequity accross our political system.

it definitely does cause complications. However grandfathering does not stop a bad law (if this is one) being changed. It would be applied to all future retirees and over time as they die out apply to everyone. Of course there are always people who are affected. Someone planning to retire in 6 months time could be quite adversely affected, but you can only go so far. I think to say tough bikkies we don’t want to complicate our laws is a bit harsh.

Labor’s negative gearing and capitals gains tax changes are both being grandfathered, so why not this one?

 

[QF WP]

[Mod hat] I'm still happy with commentary at the moment , however let's make certain that we don't have topic drift and go into places (politics) that are verboten.[mod hat off]

 

[JohnK]

I've been reading some articles recently suggesting that people need >1 million superannuation..

That's not really right and out of reach of most people.

I'm not an expert but I feel ~$300,000 is enough for a modest retirement, $500,000-$600,000 enough for a comfortable retirement and $1 million+ for a luxurious retirement which in my opinion is not worth delaying retirement to achieve.

 

[Pushka]

I've been reading some articles recently suggesting that people need >1 million superannuation..

That's not really right and out of reach of most people.

I'm not an expert but I feel ~$300,000 is enough for a modest retirement, $500,000-$600,000 enough for a comfortable retirement and $1 million+ for a luxurious retirement which in my opinion is not worth delaying retirement to achieve.

Yes that is what a friend was saying too. I suggested that we must live different lives because as you say that won’t be achievable for us. We were stymied this year by Turnbulls cap on pre tax contributions in the very year our company could afford the cash loss. It’s why I’m glad he’s gone now. His Super is fine though.

I’d like around 600k but as a couple the million total would be wonderful and that is certainly achievable when we sell our house. And then some. We have another apartment to live in plus a beach house.

 

[PLANT]

Yeah but the ones that spend now and don't save seem to come out in front with all these pension discounts that is absolute JOKE..... To self funded!!!!!

 

[cove]

One of our investments in our SMSF has received a takeover offer. Looks like we will need to up our pension drawing as I didn’t see that coming.

 

[Flying mermaid]

I've been reading some articles recently suggesting that people need >1 million superannuation..

That's not really right and out of reach of most people.

I'm not an expert but I feel ~$300,000 is enough for a modest retirement, $500,000-$600,000 enough for a comfortable retirement and $1 million+ for a luxurious retirement which in my opinion is not worth delaying retirement to achieve.

The million comes from the assumption that you can earn 5% after inflation. So that gives you $50,000 per annum which is comfortable, but I wouldn’t call luxurious. Not retiring in Australia anyway. It also assumes no rent or mortgage repayments needed. Clearly a couple can live well on $50,000 and even afford modest holidays.

$300,000 is OK as you would qualify for a part pension. I suspect the ones who would find it the hardest would be the $500,000 bracket. I am not sure where the pension cuts out and too lazy to look it up, but a couple would be living on $25,000 which would be a bit of a stretch! You would have to look for bigger returns (more risk), or be prepared to draw capital, which was the original intention.

I think our generation has it a bit tougher, as compulsory contributions started quite late for some of us, although we’ve had the ability to make larger contributions at various times, although not everyone was in a position to take advantage of that.

We made the decision to retire early, rather than maximising $, so I am in agreement with you, but rather than looking at the lump sum, it would be worth the effort to maybe create a portfolio on paper and have a look at what it earns for a few years and see if that works for you, or investigate what the funds are paying in pension mode. The lump sum itself is fairly meaningless, as it is what income it can give you and how long it will last if you need to draw lump sums.