Sent: 30-03-2011 11:52:04
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Some retirement income policy reform ideas
In the Financial Review yesterday an article by Barry Rafe who is the current President of the Institute of Actuaries.
(I'd provide a link to his article but most of you might not be able to get beyond the AFR's over-priced pay wall.)
He raises the issue of an increasing aged pension and the need to encourage Australians to work for longer.
He points out that we're penalised if we wish to work for longer. His solutions:
- Remove earned income from the aged pension income test
- Remove barriers to genuine deferred annuities
- 'New generation' annuity products that would allow retirees to pay occasional big expenses while offering exposure to the sharemarket whilst offering protection against market and longevity risks
On this last idea - it's rare to meet an actuary who doesn't like the pooling of investors' assets into opaque products that no one really understands which require actuaries to run them!
He says that recently the Institute of Actuaries suggested to the Government that it should bring back a version of the Pension Bonus Scheme which Howard introduced and the ALP got rid of almost as soon as it came to office in 2007.
He says that there are many people who are fit, active and able to work for longer but the system doesn't suit them adequately. This is very true. However sometime ago American research showed that there were many people who wanted to work until their later years but were prevented by this because they had to look after a sick relative, typically their spouse.
Finally he claims that increasing the Super Guarantee is a good idea but to 12% of salary is inadequate and should occur quickly.
Several weeks ago I referred to APRA research which showed most large super funds had not really provided any after inflation growth over the previous 10 years.
It surprises me that this data has not been jumped on by the Coalition and employer groups. Why is the Government forcing "workers" to throw their hard earned remuneration at a non-optimal solution?
To Rafe's credit he mentions that perhaps lower income groups might prefer the increased SG in their pay packets to meet their immediate expense needs. It's the first time a major industry association has effectively acknowledged that the SG threshold is too low. It was too low almost 20 years ago and now needs to be dramatically increased to take into account average salary increases.
Regretably most industry associations are trying to get the minimum entry SG salary of $450 per month reduced.
Finally please consider purchasing a copy of "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The 4th edition was released just before Christmas.
For details of the changes made from version 3 to version 4 visit: http://www.atcbiz.com.au/r.php?r=8mz1024
As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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