No. 138

SELF RELIANCE VERSUS THE LOLLY JAR MENTALITY

STONE the crows! If super’s stuffed the budget’s blown.

Yes the great national investment, which was supposed to make old Australians self-sustaining, may not save the budget. According to CPA (Certified Practising Accountants), the senescent see super as a lolly jar to pay for treats: “It seems that as people are approaching retirement they are using the equity in the family home as a source of funds to assist their children into homeownership, to take an overseas trip, retire early or simply to enjoy a lifestyle their income cannot support.” [i]

It appears they then intend to live the high-life courtesy of Canberra, no doubt claiming the pension is theirs by right of being old and ‘having paid their taxes”. As Michael O’Neill from Seniors Australia responded to the CPA, “these claims cast aspersions across an entire generation of Australians who’ve raised families, serviced mortgages and paid taxes all their lives”. [ii]

The idea that taxes are an investment, which should deliver a dividend in old age, runs deep and, while no government would ever acknowledge it, Canberra delivers. You only need to qualify for a tiny part pension of a dollar a week to qualify for supplements, which is not hard to do. According to Annette Sampson, a couple can have $1 million in assets (excluding their home) and earn $2500 a week and still receive state assistance.[iii]

It is why people organise their affairs to collect a part pension. There are even claims “the average pensioner couple” hoards $50,000 in high denomination notes to disguise assets and income so they qualify.[iv]

Insofar as it is reflects older people’s financial planning, there are two problems with this plan. For a start, it is utterly unethical – contradicting the moral obligation of self-reliance. And it is impossible for the state to sustain. The cost of the aged pension grew from $22.59 billion in 2006-07 to $32.15bn in 2010-11.[v] Once supplementary benefits and super tax concessions are added, the whole aged income bill could reach $90bn by 2015-16.[vi]

Impossible that is, unless we reduce access to benefits for the more affluent old. Or reduce the existing incentives for early retirement, notably access to super at 60, the pension at 65 now and 67 soon and the disability support pension, which funds half a million people over 55. [vii]

Good luck with selling those politically.

At least until the community realises what generous support for the elderly precludes.

As Treasury Secretary Martin Parkinson argued on Friday, health and aged care spending will outstrip GDP growth in the next decade, which will make it harder to pay for the proposed disability insurance scheme and meet the school education expectations established by the Gonski report. “As a community, we need to make choices about what governments can and should provide, and how these will be funded. And my main message today is not about what these choices are but that, as a society, we must have a considered and informed national debate about these choices,” Parkinson suggested.[viii]

Like it or not, Australians will have to decide who gets what. To spend more on the young and disadvantaged is to outlay less on their grandparents.

As Bill Keller put it in a piece about baby boomer entitlements in the US, “We may not be the greatest generation, but we are the largest — and we vote. We throw our weight around. What if we threw some of it in the right direction?” [ix]

Here’s hoping.

Stephen4@hotkey.net.au

ENDNOTES


[i] Kelly Research, Household savings and retirement. Where has all my super gone: a report on superannuation and retirement for CPA Australia October 2012, 36 @ http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/household-savings-retirement-report.pdf recovered on October 6

[ii] National Seniors Australia, “Seniors slam super lump-sum spending claims,” October 3 @ www.nationalseniors.com.au/page/Driving_Change/News/Press_Releases/2012_Media_Releases/Super_spending_claims/ recovered on October 6

[iii] Annette Sampson, “Planning for a pension,” Sydney Morning Herald, March 21

[iv] Peter Martin, “Hoarding $100s to ensure a pension,” Sydney Morning Herald, September 25

[v] Australian Bureau of Statistics, “Income and community support,” May 24 2012 @ www.abs.gov.au/ausstats/abs@.nsf/Lookup/by Subject/1301.0~2012~Main Features~Income and community support~194 recovered on October 6

[vi] Brian Toohey, “It’s time for a rethink of compulsory super,” Australian Financial Review, October 6

[vii] Actuaries Institute, “Australa’s longevity tsunami: what should we do”, August 2012, 9 @ http://www.actuaries.asn.au/Library/WhitePapers/2012/AI-WP-Longevity-FINALWEB.pdf recovered on October 6

[viii] Martin Parkinson, “Challenges and opportunities for the Australian economy,” October 5,@ www.treasury.gov.au/PublicationsAndMedia/Speeches/2012/Challenges-and-opportunities-for-the-Aust-economy recovered on October 6

[ix] Bill Keller, “The entitled generation,” New York Times, July 30

'2012