Planners accused on Age Pension

Financial advisers have encouraged people to believe that the Age Pension might at some stage cease to exist, according to Council on the Ageing (COTA) chief executive, Ian Yates.

Yates has told a hearing of the Senate Economic Committee review of the Government's legislation around the objective of superannuation that doubts about the future of the Age Pension had been an important factor in attitudes towards the importance of superannuation.

"….people feel that there is a basic threat to the pension's existence, something which, I might say, has been encouraged by many financial advisers over the last few decades — that is, they say you must do all sorts of things through them, because the pension will not exist," he said.

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"I think that is highly unlikely, but we understand why people feel that threat," Yates said.

The COTA chief executive said that he believed the Government's proposed objective for superannuation as a supplement for the Age Pension, actually served to link the pension and super as part of a package.

"In fact, it assumes the continuation of the pension. I do not see it as a replacement for the pension," he said.

"Indeed, one of the issues is clearly that, if you did away with the pension and just had a super system, the actual cost to government might be more," Yates said.

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I'm putting my hand up. I am one of those advisers. I don't believe the pension will exist in it's current form, nor should it. If you have listened to stats on demographics of the retiree to tax paying worker ratio that we are headed for, then a pension (as it stands now) is simply impossible. As to his comments about self funded retirees not claiming on the age pension somehow being a greater cost to the government than those who rely on the pension -I'd like to see where that mind boggling notion has any basis or reality.

That is atrocious behaviour by Ian Yates. Pathetic.

Headline grabbing nonsense. Ian Yates should ask the opinion of the several hundred thousand retirees with $820k to $1.1M what they think. For them, the pension ceased to exist on Jan 1. No need to wait for the future.

Of course Katherine is correct for the reasons she states, it can't stay in its present form it will be reduced again, as it should. With regards to "cost" of self funded retirees this is constantly misunderstood by the government. Mercer completed a study many years ago and, with all the changes to super and pensions is no longer accurate. However the basic conclusion was, from memory, that the break even cost was between a member balance of $800k to $1M in super it started to "cost" the gov't in lost revenue vs the aged pension. That figure would have been increased by the recent super changes. Whilst many planning clients may have this amount in super it remains a very small percentage of the population.

The big error by treasury when they look at this is they assume a tax change and all money stands still. This is utter rubbish because as soon as there is a detrimental tax change every decent adviser and every decent accountant works like crazy to restructure affairs such that much of the "cost recovery" is lost very quickly.

The problem remains, too few citizens of all ages paying any NET TAX (tax paid less gov't benefits) and too many citizens who think the country owes them something or they have "rights" to a free ride.

Yes Ian when I'm talking to my next 30 something client I'll be sure to mention no worries about the pension being a strong source of retirement income for him in 35-40 years time - I'll mention your foresight.

Yates looks like he needs to consider popping off to the retirement villa as well.

What nonsense he is going on about after the recent raft of Centrelink assessment changes we have just seen; does he think this is the lowest it will ever go? While it may not be certain that the Age Pension may ever cease entirely, by the same token, it is certain that it will not exist as an income capable of supporting the 'normal' living expenses of a retiree in the future (unless of course Ian, you are using an Ethiopian subsistence farmer as your test subject).

I actually find Mr Yates comments highly insensitive to the elderly who his group claim to be representing and lobbying for (I would also be interested in the fat salary figure he draws and how many 'business lunches' he takes in his role).

Our retirees, who are amongst the most vulnerable in our society have suffered in some situations major cuts to their Centrelink Age pension, and his comments are excessively short sighted for one in his position, especially if he is trying to indicate that in future years things will somehow be rosey. Unequivocally, based purely on demographics, population growth, immigration rates, national tax revenue projections and the exponential and mushrooming Federal budgetary expenditure items (do some research and compare the entire number of individual items the current Federal Government funds versus Gov's of even 20 years ago, and then add in all the new clamoring minority groups seeking funding each and every year).

We have done that research ourselves, and if I were a young person aged in my 20's there is no way in Hades that I'd be placing any bet that I can rely on Government benefit funding for my retirement years - so isn't that rightful and appropriate advice to be discussing with clients preparing for their future? And likewise, those who are now in retirement but concerned about their future given these recent changes, should we be telling them that 'Hey you'll be alright, future Gov's will never skrew you over by reducing benefits even further"??

What is the problem with getting people to not rely on the Age Pension? The fact is that even at the moment, if you are of Age Pension age but do not qualify for it, you don't really need it.

300,000 retirees have just had their pensions slashed or cut altogether due to Scott Morrison's bizarre budget changes 2 yrs ago. As a result, Australians are being sent a message loud & clear that if you save outside of your $10 million home, you will be financially penalised come age 67. The solution is the New Zealand system, where most older Kiwis receive a basic universal pension, while being encouraged to keep saving, keep working & to keep paying tax. The Australian means testing Age Pension system will collapse sooner rather than later, due to massive rorting - due to its woeful means testing design.

Steve, the "bizarre" changes of reducing taper rates etc simply brought the aged pension back to 2006 levels before Howard tried to buy off the electorate. I thought it ludicrous that you could have $1.05M in the bank or and STILL get the aged pension. Even now $850k is too high. The aged pension was never intended to a right, it is a safety net to prevent poverty in your old age. If retirees have to fund some of their expenses through use of savings then that is fair, why should the government fund you if you have $850k in the bank plus your house?

How ridiculous that a retired couple can live in a leafy green inner city $1 million house with only $300,000 in savings & collect $35,000 in Aged Pension, whereas another retired couple in a country town lives in a clapped out $300,000 house with $1 million in savings, & they get absolutely nothing. The New Zealand system gets rid of the complex exemptions, and simply applies a moderate savings tax to those that work harder & longer. The Kiwi Universal Aged Pension works brilliantly, without wasting hundreds of millions on unnecessary staff at Centrelink - it is far better than the mess that we have had to put up with in Australia. The Australian system is so rortable, it's indefensible.

Exactly!! and the family of the person in the clapped out house with super will probably lose some of the inheritance in tax, but the people living in the pristine mansion by the seaside pass on the property to their family tax free!! Where's the justice?

Yep.. I have met many investors without financial advisers or accountants, who nutted this out within days of the relevant Budget announcements. If the every day mum & day can work this out all by themselves, how come the rocket scientists in Treasury & the Federal Ministers work it out. One reason? They have to keep this means testing racket going to keep thousands employed inside Centrelink. This is a scam sold under the guise of "rich people don't need the pension". The New Zealand system of no means testing for Age Pensions is so simple, yet highly effective & far less distortionary for the overall economy.

The Australian system was originally designed to do that, with everyone contributing to a fund, ala the Future Fund, with no means testing because everyone had contributed equally. Then governments saw the pot of money and took it. Later they introduced means testing which divided the people. Interesting if they do the same with Future Fund - class warfare created at it's best with the NZ solution so fair.

Why don't we just blame financial advisers for global warming, ISIS and the Kennedy assassination while we're at it. By Ian Yates' logic, Medical Practitioners are then guilty of over-servicing, Accountants of being overly cautious and Lawyers of being perpetual worriers. It's called prudence and duty of care.

Who is COTA anyway? A self funding salary generating group that has any real use?

On the strength of this nonsense, they should rebrand to Council Of Insane Tirades & Useless SH** - or C.O.I.T.U.S perhaps

Many of you hit the nail on the head but many of you have overlooked one thing.
Almost every retiree in Sydney who owns a home is sitting on a non income producing asset worth at least $1m.
Like my father-in law who was a High School teacher for 39.6 years at a well known private school, he retired in 1986 with a modest super account balance of $100,000 plus about $40,000 in savings. Both he and his wife worked all their lives earning a modest income until they retired at 65.
He however also lived in an affluent suburb and bought a modest 4 bedroom home at least 40 years earlier that I figured was worth around $1m in 1986.
I tried to persuade him to sell the family home, buy a similar size one in another area near me with ocean views which he would have picked up for $240,000.
It certainly would have boosted his retirement balance substantially but he would not move from where he raised his family, friends and familiar surroundings.
It's typical of his generation.
He subsequently applied for the Age Pension after I restructured some of his meagre savings( by todays standards).
He's content with that because his needs are modest.
He is still going at 97, and I guess his property without doing anything to it is worth somewhere in the vicinity of $4.5M.
The house he could have bought for $240,000 was recently sold for $2.55M again without anything much being done to it.
So as you have all stated, Government Pensions will be harder to obtain for many of those aging citizens.
I suspect that the family home will be included at some stage in the assets test and if you own a property over $500,000, it will be counted.
That will force many to sell their homes even if they don't want to in order to survive.
That's the commercial reality of Governments of both persuasions that continue to borrow money, to give it away to Third World countries, stupid climate change programs that will change nothing at the expense of all their own citizens.
Until this country gets a real leader and not one who supports Corporate Socialism, this country will not what it should or could be.

Agree 100% with everything you have said.

Hurry up and get the primary home in the assets test (state by state value above a reasonable threshold)... Welfare bill of Australia is astronomical, we don't need to keep funding those who have the means to fund themselves.

Had to take a close friend to hospital on the weekend, relatively serious issue, 6 hours wait for a doctor. Not enough funding to have more doctors on apparently. Surely that's more important than paying a couple with a 3m house and 850k in other investments an age pension.

Having had this discussion directly with several Federal Ministers [from WA], I cannot see the Family Home being added to the Asset Test. Therefore the only solution is to move to the New Zealand system, where means-testing was abolished [in 1948] & savings are taxed moderately. No one in NZ is complaining about it, that's for sure - because it works & is 100% equitable for everyone.

Australia is unfortunately very different in the respect we do not live in a society that wants it to be 100% equitable.

Most here want a robin hood structure where the 'rich' pay for everything and the battlers just hold their hand out.

Dear Alleycat, I love you comment about the problems of goernemnts borrowing too much. Did you read the BBC news article today on Germany. The have a record surplus and have been forced to increase the national minimum wage in 2015 and increasing state spending on infrastructure, and increased pensions. They they get to have their cake and also eat it. We are more like America - running a significant trade deficit, so perhaps we will end up with a "trump" look-alike" in charge......

aaahh the blame game. it's the financial planners fault.. it's been at least a week since I heard that line. In the latest news world poverty has been blamed planners. ..back to that 1.5 hour wait on the Centrelink phone line to fix up a typo, why would you want to be on the age pension..

What a load of lobbyist BS. Any financial planner is doing their clients a service in warning them to expect future changes to and overly generous welfare system.

If you are advising 40 something clients about their retirement and assuming they will have access to benefits at today's levels....... you are misguided at best, incompetent and disingenuous at worst. If you're currently paid as a lobbyist to argue there should be no change to todays age pension benefits, the same applies to you.

Seriously ... at what stage did you begin to believe any politician and what they said, .... has the faintest clue about the economy, or the plight of the average Australian.
May I remind you that one politician who said "There will be no carbon tax under the government I lead".
I know in WA you're a bit insular but BS no matter where you reside when you're a politician, goes a long way.
Look how much they've tinkered with superannuation, taxation and worst of all how we in the Financial Services have been over-regulated to prevent crooks and bad behaviour.
Until God makes the perfect "human being", the crooks will always be there and no amount of legislative change will alter that. All it means is, the crooks get smarter.
But the majority of good financial planners and dare I say it Life insurance writers are punished for the sins of a few.
Now do you really think any politician knows what's going on in his/her electorate.
The local Federal Member in my electorate lives in my street. He was formally Mr Trumballs campaign manager.
He was on the PJC to look into the LIF legislation.
I'm advised by a 3 people in our industry who attended a meeting with him to discuss the detrimental effects the LIF legislation would have on small business and the consumer.
You'd think as our local Federal MP he would listen and act for his constituents.
His answer was that the 3 people he saw should write to every individual member of the PJC to plea their case.
My take on that is that the people who claim to represent you and I ... don't bleeding care" and will tell you anything to see you on your way.
Be warned, the change to the family home in the Assets Test is on the cards.

Should houses come into the Asset Test [which I doubt - it might be above $1 million perhaps] it will be a further incentive not to save for a house either, as it will cost a couple $35,000 pa. Rent forever, spend it all up, & then collect the full aged pension. This is why the whole NZ system is so logical. It just makes sense.

Ummm, just stating the obvious, but the Age Pension has already ceased to exist (at least for the next 7-8 years) for many of my clients, thanks to the changes in the Assets Test on 1 Jan 2017. I'm not here to complain, but it is happening, right now.

These things are never done in a single absolute blow, always gradual.

It was only a few years ago Age Pension was age 64 for Women, now it is 67, and talk in Canberra is to move it to Age 70 for Men and Women.

Wake up from your slumber Mr Yates.

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