Superannuation Discussion + market volatility

[amaroo]

Yes agree, was only noting that it's sloppy reporting to only focus on the cash. Given many balanced funds have 50% in shares as well as their cash/fixed interest investments it would take considerably more of a run on those assets than is implied by the 50bn vs 2 bn implied in the article.

I didn't read like that. What was implied and detailed was where the rest of the cash was going to have to come from.

 

[amaroo]

Logical article from the SMH.

Government shouldn't rescue airlines or super funds from their own ineptitude

The Morrison government is right to ignore the bailout pleas from Virgin Australia and some industry superannuation funds. Poorly managed private companies have only themselves to blame.

www.smh.com.au

 

[amaroo]

Today's AFR

Big super warns huge jump in withdrawals may hurt recovery

The demand for hardship withdrawals could limit the scope for industry funds to recapitalise corporate Australia during the recovery from the pandemic.

www.afr.com

 

[amaroo]

Today's AFR

Warning of asset fire sale

Funds catering to hard-hit industries such as hospitality, retail and tourism could receive many claims from young jobless members with few other assets to fall back on.

If between one-third and a quarter of members of Hostplus and REST withdraw $20,000 each, the funds will have to find a combined total of nearly $20 billion. If they do not have enough cash, they will need to sell assets at bargain prices.

A related problem may emerge in that remaining members are stuck with a portfolio full of hard-to-sell illiquid assets.

Cash-starved super funds could be forced to merge

Josh Frydenberg's warning could reignite the superannuation culture wars between industry funds and the government.

www.afr.com

 

[Pushka]

Today's AFR

Warning of asset fire sale

Funds catering to hard-hit industries such as hospitality, retail and tourism could receive many claims from young jobless members with few other assets to fall back on.

If between one-third and a quarter of members of Hostplus and REST withdraw $20,000 each, the funds will have to find a combined total of nearly $20 billion. If they do not have enough cash, they will need to sell assets at bargain prices.

A related problem may emerge in that remaining members are stuck with a portfolio full of hard-to-sell illiquid assets.

Cash-starved super funds could be forced to merge

Josh Frydenberg's warning could reignite the superannuation culture wars between industry funds and the government.

www.afr.com

I realised we are largely with HOST plus in the medical sector. I guess that will save us a little.

 

[amaroo]

Today's AFR

Hostplus changes rules to freeze withdrawals, stop cash switching

Hostplus has quietly changed its terms and conditions so it can freeze redemptions and prevent cash switching, as the $50 billion fund faces questions about its capacity to meet what could be an avalanche of requests for up to $20,000 by out-of-work members.

A new clause has been inserted into Hostplus' product disclosure statement that allows the fund to "suspend or restrict applications, switches, redemption and withdrawal requests".

The statement previously assured members that any request to switch investment options received before 4pm on a business day would be processed. Now, the trustee retains "absolute discretion" to disallow the movement of money and warns requests might be processed with "significant delay".

Chris Brycki, the founder of online investment adviser Stockspot, believes the abrupt change occured on Friday night and is concerning for Hostplus members.

Hostplus updates PDS to freeze withdrawals, stop cash switching

Hostplus has quietly changed its terms and conditions so it can freeze redemptions and prevent cash switching.

www.afr.com

 

[JohnK]

I only just read this but it may be worth following up with a class action currently going on. A real long shot but maybe you can do some research.
I had a policy with Colonial Mutual in the 1980's and the class action is around the company not investing in a manner that was in the clients best interest. There is a link to the Commonwealth Bank there.
The lawyers are Slater & Gordon and there is info on their web site. I have registered but have no idea if I qualify in any way but they are sending me updates. Worth having a look I would have thought.

Thanks. Will try to do research if time permits. If I'm not mistaken my dad transferred his small Super balance to Colonial via CBA in the late 80's and lost ~15%-20% in first year before he withdrew the funds.

 

[CaptJCool]

I thought I’d throw this in the mix seeing Dec 2019 figures came out today


Age pensions figures have flatlined because of significant impact of Superannuation

Aged pension recipients numbers as follows;
Sept 2013 2,359,215
June 2014 2,404,902
June 2015 2,486,195
June 2016 2,538,161
Census total over 65 3,676,763 so 69.5% by Sept 2016
Sept 2016 2,556,410
June 2017 2,498,765
June 2018 2,477,861
June 2019 2,533,359
Sept 2019 2,525,124
Dec 2019. 2,515,388

2021 Census total ESTIMATE
needs include pop aged 60 plus at 2016 census..

4,976,160 (2016 Census pop 60+)

LESS
Deaths (650,000) (5 years by 130,000)
Adjustment for age pension age = 66(290,000)

TOTAL AT 2021 Age Pension Age 4,036,160

trend % would be that around 62.5% of all those over 66 at 2021 would be Age Pension recipients

DSS Payment Demographics

Search

data.gov.au

Population figures - Census total over 65 3,676,763

2016 Australia, Census All persons QuickStats | Australian Bureau of Statistics

quickstats.censusdata.abs.gov.au

Deaths (Age 65+) per annum 130,000

ABS.Stat beta decommissioned

stat.data.abs.gov.au

Will be interesting to see the effects of the current losses on future figures.


PS Keating would love that around 1.5 million Aussies are self-reliant on Super in retirement

 

[CaptJCool]

Following on from my posting above


So while age pension numbers are remaining relatively flat-lined,

Aged pension recipients numbers as follows;

June 2016 2,538,161
Census total over 65 3,676,763 so 69.5% by Sept 2016

June 2017 2,498,765
June 2018 2,477,861
June 2019 2,533,359
Dec 2019. 2,515,388
Mar 2020 2,529,617


2106 Census tells us each year aprox 260,000 turn 66 and 130,000 pass away (net increase 130,000)

2016. 2011
60-64 years 1,299,397 5.6 1,206,116 5.6
65-69 years 1,188,999 5.1 919,319 4.3
70-74 years 887,716 3.8 708,090 3.3
75-79 years 652,657 2.8 545,263 2.5
80-84 years 460,549 2.0 436,937 2.0
Over 85 year 486,842 2.1 402,681 1.9

Suggesting superannuation and self-funded are making significant in-roads into reducing numbers

Rough estimate 3,870,000 of eligible age 66 or older
65% on age pension
41.9% on full age pension
23.2% on part pension
34.9% not that’s 1,350,630 Australians


Will be interesting to see where to from here as investments got a March 2020 shellacking but share prices recovered and dividends crashed.

Probably keeps those off age pension (assets test) leaving them with no income (very limited dividends) until they realise those shares and spend the resulting cash .....

So far the trend has been for every two turn 66 only one accesses age pension and in effect replaces another who passed away

With further maturing of superannuation and broad-scale gender equitable employment this trend ought head towards 3:1

The updated figures for June 2020 in the midst of COVID-19 won’t be available for sometime, and I am figuring there’ll be a noticeable uptick in new age pension recipients over and above the ordinary level

 

[CaptJCool]

Because I’d been following my super funds earning rates, I though it a useful contribution to attach this spreadsheet as a

HANDY REFERENCE

 

[andye]

I am still accumulating in a growth fund but despite the Covid stock market fall, the balance (excluding new contributions) is now more or less where it was a year ago (without any dramatic interventions).

This should not cause a major change in numbers of pensioners (given that some will just choose to work for another year).

Of course individuals could have sold shares low a few months ago. That either reflects bad (or ignored or unsought) advice or too little diversification away from shares.

Edit: I hadn't accounted for the strong possibility that over the next year,a lot of people may lose their jobs and be forced to retire on less than they hoped. However that is an economy problem rather than a superannuation one.

 

[CaptJCool]

I am still accumulating in a growth fund but despite the Covid stock market fall, the balance (excluding new contributions) is now more or less where it was a year ago (without any dramatic interventions).

This should not cause a major change in numbers of pensioners (given that some will just choose to work for another year).

Of course individuals could have sold shares low a few months ago. That either reflects bad (or ignored or unsought) advice or too little diversification away from shares.

Yea, seems your fund hasn’t offloaded losses “notional” or real to members. I suspect that’s not the case for all funds.

Investment disclosures

This page provides information on asset allocation, currency exposure and portfolio holdings.

www.csc.gov.au

because the fund in the spreadsheet is a defined benefits one, offloading “notional” losses reduces the Commonwealths liability. Because members in this fund have now been in it for at least 30-32 years, this makes a significant dent to their fairly immediate accessible balance. Each 1% loss burns $4-5000 which if not recouped cuts the ongoing pension stream by around $1200 per annum. While this doesn’t seem like a lot, over life expectancy the recent 10% losses reduce Future Fund obligations.... by around $350,000 per new recipient....

 

[Flying mermaid]

Will be interesting to see where to from here as investments got a March 2020 shellacking but share prices recovered and dividends crashed.

Probably keeps those off age pension (assets test) leaving them with no income (very limited dividends) until they realise those shares and spend the resulting cash .....

Sounds like us - and not just dividends. We had a serviced apartment in the smsf and rents were cut 70% for 6 months (and the ACT govt is taking the rest in rates and land tax). Given the lack of travel I am assuming the current reduction will continue until domestic travel resumes. All I can say is thank goodness for Telstra .

fortunately Mr FM was doing a bit of consultancy, so he increased his hours and I have been doing a bit of trading. Portfolio is back to what it was in June 2019, but I lost all the gains to January. I am fairly confident it will all recover, but it’s the dividends to live on that is the issue. Fortunately with no travel, expenses are down as well.

we have no intention of going on the age pension.

 

[CaptJCool]

I am fairly confident it will all recover, but it’s the dividends to live on that is the issue. Fortunately with no travel, expenses are down as well.

we have no intention of going on the age pension.

Ah, swings and roundabouts

Perhaps that’s the key

less movements from home would considerably cutback required income -

If every Domestic trip is $2,000 plus per couple, QED

 

[Pushka]

Im really happy with HESTA returns since we rolled over to them. I guess medical people didnt cash out as they still have work.

 

[cove]

We have stayed with our SMSF and we consider the accounting and audit fees by ESUPER to be very reasonable. We have had complete accuracy over about 8 years and we are in pension phase. We do enjoy the tax free status.

 

[levelnine]

That’s the thing with this particular fund. Most of the members work in industries that have been devastated and have already lost their jobs, are young (average age 35) and only have an average balance of ~ $37k.

The fund has $54B, but only $2B in cash.

As many commentators have flagged, it's the purportedly overvalued, illiquid assets that should be concerning.

Your Industry Super fund is about to lie to you | Nucleus Wealth

Most superannuation funds have significant balances in unlisted assets. Many are saying that these assets haven't lost money despite sharemarkets being down 30%

nucleuswealth.com

Where are all the fear mongers these days? The industry funds seem to have survived the COVID-19 withdrawals perfectly fine. A complete beat up.

 

[chelzmalee]

we have no intention of going on the age pension.

Early 30's here. I kind of had it drummed into me from 18 that there won't BE an age pension when I get to retirement age, so superannuation is my only hope.

I'm with Aus Super, high growth had .61% increase over last 12mths, which considering how everything tanked due to Covid, I'm happy with. Plus, making the additional contributions has helped me to be in a position of twice the super of my similar age counterparts.

 

[33kft]

I kind of had it drummed into me from 18 that there won't BE an age pension when I get to retirement age

Even if there is an age pension, and if you qualified for it, I think we can all agree (from current observations) that it would not bring with it a great quality of life in retirement.

 

[CaptJCool]

Where are all the fear mongers these days? The industry funds seem to have survived the COVID-19 withdrawals perfectly fine. A complete beat up.

Australians took more out of their super accounts in June than they put in

Labor says the latest statistics make the legislated rises in compulsory superannuation from 9.5% to 12% more important than ever

www.theguardian.com

Seems like all the inbound super was funding the early release.... well, for those funds who matched .....

Would note, somewhere I recall 390,000 early releases were temp visa holders.

The tax rate for permanently departing Australia is 35%

Given they told the truth on their student visa applications, parental support to the tune of $70,000 per annum would be available..... had they misrepresented their financial status, a 20 hr a week job wasn’t going to fund $70,000 in any event....

I’d take the tax-free super too...