Superannuation Discussion + market volatility

[QF WP]

With the reduction in retiree asset values along with the ability to take up to 50% reduction in pension income, some retirees are now able to claim more Centrelink and their retirement funds are doing less of the heavy lifting. Centrelink income may be capped, but there isn't an asset backing it to worry about. More of my clients are updating their asset values with Centrelink more often now, to achieve the higher payout under Age Pension.

 

[CaptJCool]

With the reduction in retiree asset values along with the ability to take up to 50% reduction in pension income, some retirees are now able to claim more Centrelink and their retirement funds are doing less of the heavy lifting. Centrelink income may be capped, but there isn't an asset backing it to worry about. More of my clients are updating their asset values with Centrelink more often now, to achieve the higher payout under Age Pension.

I did expect this was likely, and possibly pour in considerable extra numbers, at least temporarily.....June DSS figures won’t be out for awhile although the bump-up in Age pension payments will be noticeable in govt expenditure Budget projections sooner

Presumably, as values go down and up and down and up, one might qualify for say 3 months and then re-qualify later for a further period.

I did note too Real estate income - Services Australia of which I wasnt aware where “rent, lodger income” can be offset against your mortgage interest.

Found out about it when helping a friend with the myriad of categories necessary to obtain a centrelink Payment as he took on a lodger earlier this year to help with cashflow..

Negative gearing alive and well ....
Potentially this affects age pension eligibility and enables one to qualify where a mortgage is in existence.

I’m assuming the 50% reduction is due to the temporary move of account-based pensions drawdown from 4% to 2% where the underlying assets have suffered a drop in value ?

 

[CaptJCool]

With the reduction in retiree asset values along with the ability to take up to 50% reduction in pension income, some retirees are now able to claim more Centrelink and their retirement funds are doing less of the heavy lifting. Centrelink income may be capped, but there isn't an asset backing it to worry about. More of my clients are updating their asset values with Centrelink more often now, to achieve the higher payout under Age Pension.

June figures are now in. They aren’t an overwhelming increase ....

 

[QF WP]

That appears a pretty normal increase in numbers accessing Centrelink Age Pension - we have an aging population, but also increasing mortality (COVID-19 has probably shown an uptick in normal numbers).

Interesting decrease in Italian and Greek numbers - they've gone back during COVID-19 perhaps...or been a higher % of poulation who have sucummed to COVID-19?

 

[andye]

Interesting decrease in Italian and Greek numbers - they've gone back during COVID-19 perhaps...or been a higher % of poulation who have sucummed to COVID-19?

I suspect its a function of the wave of original migration. Unlike the Brits and NZ, their big migration was over a relatively short period, slowing down in the 1970s. I doubt there have been enough Covid-related deaths to affect the numbers

 

[CaptJCool]

I suspect its a function of the wave of original migration. Unlike the Brits and NZ, their big migration was over a relatively short period, slowing down in the 1970s. I doubt there have been enough Covid-related deaths to affect the numbers

I’ll look through the prior period figures

They are definitely aging cohorts

Also the ABS allows you to search by country of birth so you see the high % of over 65s in the particular groups, plus of course you can track the large volumes of arrivals by age (so to speak) and see the citizenship rates of each grouping too

 

[CaptJCool]

That appears a pretty normal increase in numbers accessing Centrelink Age Pension - we have an aging population, but also increasing mortality (COVID-19 has probably shown an uptick in normal numbers).

Interesting decrease in Italian and Greek numbers - they've gone back during COVID-19 perhaps...or been a higher % of poulation who have sucummed to COVID-19?

In Dec 2016, the first period in which Country of Birth was available

Italy 103,595
Greece 72,494

Dec 2019
Italy 90,394
Greece 67,341

Ref Search

 

[rogerkambah]

My wife is about to retire (next couple of weeks).
With the current US market losses today, uncertainty and more covid lockdowns in Europe would it be a good idea to change her superannuation investment in AustralianSuper from Balanced to Cash. Her retirement estimate has slipped a couple of thou in the last 2 days.

 

[tgh]

Super from Balanced to Cash ?

IMnsHO.. this would be a bad decision.. unless you think that we are on the verge of Armageddon.. in which case it doesn't matter.
Over time , shares in large Australian companies will return the best growth+Income for passive investors.
Cash holdings are a guaranteed process of devaluing your money and this will not change anytime soon
In retirement one should always have a minimum of years income (drawings) in cash

 

[andye]

My wife is about to retire (next couple of weeks).
With the current US market losses today, uncertainty and more covid lockdowns in Europe would it be a good idea to change her superannuation investment in AustralianSuper from Balanced to Cash. Her retirement estimate has slipped a couple of thou in the last 2 days.

Impossible to say (in my opinion). What if Pfizer announced an effective vaccine next week? Timing the market is hard and more akin to gambling than investing. You are likely investing for another 20 years

 

[Flying mermaid]

My wife is about to retire (next couple of weeks).
With the current US market losses today, uncertainty and more covid lockdowns in Europe would it be a good idea to change her superannuation investment in AustralianSuper from Balanced to Cash. Her retirement estimate has slipped a couple of thou in the last 2 days.

If it were me, I wouldn’t as volatility is huge and it could go soaring up in a couple of weeks. In the long term she would be fine. These things are so hard to know.

If it means she can sleep better and not worry that’s another consideration - everyone’s risk tolerance is different.

 

[OATEK]

I took the profits from the fund pre-Covid and moved them from growth to cash, so I have about 4-5 years in cash available for my income stream. The rest stays in a mix of growth and balanced for when things get better.

 

[Buzzard]

I/we have cash to last us 3 or 4 years and super in a Balanced (what ever that is ) fund. As we don't need the minimum draw down it's reinvested into our choice of Vanguard ETF 'S.
Having cash to last a few years is imperative IMHO.

 

[QF WP]

An interesting piece from Aberdeen Standard (worldwide investment manger) on the different scenarios, liklihood and impact might assist:

What does the US Election mean for markets?

As the US Election enters its final week of polling and predictions, what are the key market impacts of the three most likely outcomes?

www.aberdeenstandard.com

Our forecast: one week out

Possible scenarios

Scenario 1 Description​ Probability​ Democrat clean sweep President Biden with Democrat majority in House and Senate 50% Policy impact Significant increases in taxes for corporates and high earners (dependent on majority). Higher spending on entitlements, infrastructure, education, green technology and jobs. Tighter environmental, tech and financial regulation. Multilateral approach to China and progress on the OECD digital tax initiative. Scenario 2 Description​ Probability​ Biden with split Congress President Biden with Democrat majority in House and Republican majority in Senate 25% Policy impact More rapid fiscal consolidation due to gridlock in Congress. Tighter environmental, tech and financial regulation. Multilateral approach to China and progress on the OECD digital tax initiative. Scenario 3 Description​ Probability​ Trump with split Congress President Trump with Democrat majority in House and Republican majority in Senate 20% Policy impact Highly uncertain path for fiscal policy based on the ability to find compromise. Loose environmental and financial regulation. Erratic and unilateral approach to China and other trading partners including EU. Scenario 4 Description​ Probability​ Republican Clean Sweep President Trump with Republican majority in House and Senate 5% Policy impact Slow tightening in fiscal policy. Lower taxes for corporates and households. Looser environmental and financial regulation. Erratic and unilateral approach to China Uncertainty over next Fed Chair

 

[get me outta here]

I may have missed it, but is there a decided end date for the 50% reduction in pension income?

With the reduction in retiree asset values along with the ability to take up to 50% reduction in pension income, some retirees are now able to claim more Centrelink and their retirement funds are doing less of the heavy lifting. Centrelink income may be capped, but there isn't an asset backing it to worry about. More of my clients are updating their asset values with Centrelink more often now, to achieve the higher payout under Age Pension.

 

[Jacques Vert]

I may have missed it, but is there a decided end date for the 50% reduction in pension income?

The reduced minimum drawdown is for both the 19-20 and 20-21 financial years. So the answer to your question is June 2021 (assuming that you make the yearly minimum).

 

[CaptJCool]

An interesting piece from Aberdeen Standard (worldwide investment manger) on the different scenarios, liklihood and impact might assist:

What does the US Election mean for markets?

As the US Election enters its final week of polling and predictions, what are the key market impacts of the three most likely outcomes?

www.aberdeenstandard.com

​ ​ ​ ​ Our forecast: one week out

​ ​ ​ ​ ​ Possible scenarios

​

​ ​ ​ ​ ​ Scenario 1 Description​ Probability​ Democrat clean sweep President Biden with Democrat majority in House and Senate 50% Policy impact Significant increases in taxes for corporates and high earners (dependent on majority). Higher spending on entitlements, infrastructure, education, green technology and jobs. Tighter environmental, tech and financial regulation. Multilateral approach to China and progress on the OECD digital tax initiative. Scenario 2 Description​ Probability​ Biden with split Congress President Biden with Democrat majority in House and Republican majority in Senate 25% Policy impact More rapid fiscal consolidation due to gridlock in Congress. Tighter environmental, tech and financial regulation. Multilateral approach to China and progress on the OECD digital tax initiative. Scenario 3 Description​ Probability​ Trump with split Congress President Trump with Democrat majority in House and Republican majority in Senate 20% Policy impact Highly uncertain path for fiscal policy based on the ability to find compromise. Loose environmental and financial regulation. Erratic and unilateral approach to China and other trading partners including EU. Scenario 4 Description​ Probability​ Republican Clean Sweep President Trump with Republican majority in House and Senate 5% Policy impact Slow tightening in fiscal policy. Lower taxes for corporates and households. Looser environmental and financial regulation. Erratic and unilateral approach to China Uncertainty over next Fed Chair

Looks like Scenario 3 unless buyers remorse kicks in on the Two Georgia Senate run-offs on 5 January....

Either way, the market hasn’t really cared

I would point out this
If you take California out of the mix, results of the popular vote and House would have been the opposite.

You could say CALIFORNICATION was the difference.

 

[I love to travel]

I am not thinking that there will be any major market movement this week. Any other thoughts?

 

[OATEK]

I am not thinking that there will be any major market movement this week. Any other thoughts?

I think the Senate decision will be vital. The market will feel much calmer if Democrats have to negotiate with the Republicans in Senate.

 

[QF WP]

I’ve just had 3 meetings today with BDM’s of large multi-national investment management companies and they all agree the markets are hanging on the final Senate vote and the 2 recounts that appear will happen, before passing judgement on Biden as President and his direction. They are broadly positive on his direction with COVID and on the fence about his tax hike position. The markets will have a run before Xmas if the legal challenges dissipate and be broadly positive from 20 January with the exuberance around inauguration of the 46th President