What would you prefer?

It's a hypothetical question at best.

At worst, the decision has already been made that superannuation will not generally provide a more comfortable standard of living in comparison to a pension unless one is able to accurately predict their time of death.i

This is what I wrote to Bill Shorten.


The Australian government provides everybody of pension age a safety net in the form of the basic pension, so why should the government give such huge tax concession to the self funded retirees?
If a retirees income falls below $41,719.60 he/she can apply for a part-pension, and for a couple it is $63,824.80, which are very generous limits, particularly as most of the self-funded retirees pay little, or no tax if their incomes come from taxed super funds.
Consider the part-pensioners at the lower end: as soon as a single person income reaches $3,796.00 his/her pension is reduced by $0.50 for every dollar extra, and for couple it is $6,656.00, hardly a very generous standard of living.
Currently the Australian government pays some $25 billion in age pension, but at the same time allows some $25 billion in tax concessions. As the compulsory super starts maturing, the tax concessions will by far exceed the cost of the age pension, although at least 70% of the retirees will be still dependent on a part age-pension, but where is the government get the tax revenue to sustain such expenditure?
As the self funded retirees are enjoying extreme wealth, paying little or no taxes, they will travel a lot more overseas, which will again strain the Australian budget and affect the local business, because more money will be spent outside Australia. This will widen the gap between the have’s and have not’s enormously, particularly among the retirees, as the 20-30% with incomes above the age-pension, but always the assurance of a part-pension, should their incomes fall, and the 70% on a full or part-pension, who will be prevented to a large  degree by the means test of the basic pension, to a decent standard of living.
Australia is the only country among the OECD countries which means tests the basic age-pension, and allows such generous tax concessions for super, which benefits mainly the upper 30% of the population, and as a result the average Australian retirees are the second poorest after Ireland.
The means test for the basic age-pension should be abolished, but so should all the tax concessions for super, and the compulsory super should be scrapped.
Australia also spends a larger percentage of the GDP on military, more than most European countries, to go fighting in other countries, to establish Democracy, yet Australia is not a Democracy but a Plutocracy. I probably will not see it in my life time, but if Australia does not become more egalitarian and democratic, it will have similar riots that other countries experience now.
This are the tax savings for a person who can use the maximum super contributions if under 50 Years of age.
Concessional contribution at 30.June 2010
$25,000 *0.465=$11,625
$25,000*0.15=3,750 Tax saving= $11,625-$3,750=$7,875
$450,000 in super fund
$450,000*.06=$27,000 Interest
$27,000*0.465=$12,555
$27,000*0.15=$4,050 Tax saving $12,555-$4050=$8,505
Total tax saved = $8505+$7875=$16,380 for this year.

If the person is over 50 contribution is as follow.
$50,000*0.465%=$23,250
$50,000*0.15=$7,500 Tax saved= $23,250-$7,500=$15,750
Total Tax saved==$15,750+$8505=$24,255 This is well above the age pension

As the persons super balance can exceed the $500,000 limit for the over 50’s the contribution drops to $25,000, but the person contributes $450,000 non concessional into the fund so that the fund now holds $900,000

$900,000*0.06=$54,000
Tax= $54,000*0.465=$25110
Tax= $54,000*0.15=$8100 Tax saved= $25110-$8,100=$17,010
Total tax saved=$17,010+$7875=$24,885

The tax savings for a person in this position will only increase further as the balance in their fund increases and therefore the income which is taxed at 15%. And when the person reaches the age of 60 and starts drawing down the super, there will be no tax obligation at all. Assume a fund balance of $2million*6% =$120,000 income completely tax-free and this is a very conservative approach by having super balance in a term deposit.

If a person starts to contribute the maximum concessional contribution at the age of 30, by the time they reach the age of 65, he/she will have saved more in tax concessions than what he/she would get in the form of age-pension, even if they live to the age of 100.

Yet you talk about a “sustainable social system” and you have been challenged by the Australian Taxation Office for breaches of the contribution limit.

Could the government prove that my calculations are wrong, or else admit, that it governs only for the benefit of the elite 30% of the population.

Wouldn't you like your super contribution to build some big new infrastructure? If you said "no", that's too bad because you don't have a choice.
..............................................................................

Eyes on Your Retirement Savings

On Wednesday, Money Morning reader, Dennis sent the following note to the Money Morning mailbag:

"A few weeks ago you commented about the government trying to work out a way of tapping in to (read stealing) the $trillion+ we mere mortals have tied up in super, salivating as they go!!

"At the time I thought 'Krissy boy, you've lost it!'

"However, this circular just arrived on my desk. I have highlighted the relevant part. Unfortunately for us mere peons, you were right!!"

Dennis isn't the first reader to say we've "lost it".

We've lost count of how many readers (and ex-readers) have told us we're an idiot, stupid and insane.

It's just a shame they don't stick around to see we aren't so idiotic, stupid and insane after all.

The "circular" Dennis refers to was Wednesday's press release from federal assistant treasurer, Bill Shorten. It's titled: "More Money in Retirement - An Historic Boost to Superannuation". The key part states:

"The increase in the SG [Superannuation Guarantee] will boost the superannuation savings of Australian workers by around $500 billion by 2035. A proportion of these savings will be channelled back into the Australian economy to fund jobs and nation-building infrastructure."

Now, we won't go off on a rant, explaining the immorality of government-enforced savings schemes. But rather we'll point out this is more proof of the retirement theft we've warned you about since 2009.

The key part of the statement is the bit we underlined.

Our simple question is: how can any government possibly know that funds will invest in "nation-building infrastructure"?

It can't. Unless it plans on forcing super funds to invest in "nation-building infrastructure".

In other words, the government is annoyed that there's well over $1 trillion of personal savings it can't get its hands on. So one way of grabbing it back is to force super funds to build things the government would like to build.

If you think we're grasping at straws, how's this for a convincer...


Australia's Next White Elephant "Investment"

In Tuesday's Australian Financial Review, an ad appeared from the Minister for Infrastructure and Transport, the so-called "honourable" Anthony Albanese. It publicises the Financing Australia's Infrastructure conference:

"The conference will be examining potential reforms to Australia's infrastructure financing and funding practices as well as numerous major infrastructure opportunities... This will be an opportunity to reflect on the reforms in the light of real world projects and also to make stakeholders aware of the incredible opportunities in infrastructure for the nation."

Put simply, the conference will be full of fund managers who are eyeballing your retirement savings. So they can build fancy infrastructure projects.

That's despite the fact that super savings are supposed to benefit you in retirement. Instead schools, roads and bridges will get the benefit of your retirement cash. That may sound very noble, but wait until you need to retire. It won't seem so noble then.

As we see it, it's another kick in the teeth for savers. It's bad enough most are unwittingly over-invested in the high risk and volatile stock market. Now this.

Because make no mistake, this isn't about giving your retirement savings a boost. Nation-building is about ministers getting drunk on building the modern-day equivalent of the hopeless Snowy Mountains Scheme...

It's about building their legacy rather than your future wealth.

Doubtless we'll get another bunch of letters telling us we're off our rocker. And that unless we clean our act up the letter writers will unsubscribe from Money Morning. But we're used to that.

The fact is the Australian federal government rues the creation of super. It took potential spending money away from the government. But now it's set on getting it back.

The next stage of the government's retirement theft is under way. Don't say we didn't warn you...

http://www.moneymorning.com.au/20111104/your-retirement-savings-the-day-the-gove...

Pension or Super?

If by Super we assume the Futures Fund - it doesn't matter which.  They're both coming from the same place and can be assigned whatever quantity of dollars the government of the day wants to give it.

Amadd wrote on Jun 18^th, 2011 at 2:11am: