Transfer balance cap?

dungfungus said :

chewy14 said :

dungfungus said :

chewy14 said :

The sense of entitlement seems exceedingly strong here.

The government will allow you to have $1.6million in tax free retirement savings in pension mode.
Above this, you will need to keep an amount in accumulation and pay a whopping 15% tax on inputs and earnings.

Yes, there will be some administration issues for people in defined benefit schemes but they are not major and can be dealt with through seeing a financial advisor if necessary.

And the author believes this is onerous?

He should look up to the sky and thank his deity every day that he is part of a generation and workforce (access to the CSS) that allowed such generous retirement conditions for workers that will never be seen again.

This is like someone complaining about having to work out where to put their money after winning the lottery.

Having been employed in the private sector or self-employed all my working life I never had the leg-up of a taxpayer funded defined-benefit pension that most public servants got/have. If that’s not an entitlement I don’t know what is. At least the government has now recognised the future worth of those (unfunded) “old CSS ” pensions by notionally capitalising the annual benefit 16 times to be added to the cap. It would appear that the OP thinks this is unfair.

My retirement is totally self-funded and to get there I worked hard and paid 15% tax on all contributions plus tax on all fund earnings up until pension phase. I don’t have nearly enough to allow this $1.6 million cap be an issue and if it was I wouldn’t have an issue in paying the extra tax but to infer somehow that this is like winning a lottery is nothing more that class envy.

By the way, superannuation invested in term deposits now will earn about 2.5%pa. which is one third of the rate available 10 years ago. Under the rules of a SMSF a contributor must withdraw at least 5% of the account balance annually. This means half comes from fund earnings and half from reducing capital which is not a good equation for living longer than 80 considering the spiralling costs of living in Canberra where the average wage is 50% higher than the rest of Australia. Consider that we seniors need constant dental treatment and this can easily exceed $10K a year.

I would swap this for an indexed CSS type pension any day. Then I would feel entitled.

My comment about winning the lottery, whilst facetious, was in two parts.

The first being the extremely generous conditions of the CSS, the government correctly recognised that these were not sustainable long term, which is why it was closed to new entrants.

The second being the still generous conditions of superannuation in general, with the new rules still providing a great tax vehicle to encourage people to save for retirement. Only having to pay 15% on earnings for the amount over $1.6million is more than reasonable.

Oh, and very few people should be invested solely in term deposits, there’s conservative and then there’s too conservative. Capital preservation is also unnecessary long term, the money is for your retirement not your beneficiaries inheritances.

Unless the money is preserved there will be no money for retirement so that’s why I am “too conservative”.

Besides that, I have quite a few colleagues who were getting great returns with all their super in equities just prior to the GFC. Most lost half their capital and some lost nearly all when it happened.

I have already stated the cost of living in Canberra is an impediment to making superannuation last so there is little chance there will be anything left for the estate to distribute. Anyhow, by then, whoever is in power will have a raft of “end of life taxes” to fund the rest of unfunded pensions due to public servants and their spouses.

So you agree that preserving capital is actually not a good idea because retirement doesn’t require you to fund inheritances.

And there is somewhere between being invested solely in equities or term deposits. If your friends remained in shares after the GFC, they would have seen very strong returns since then. Most people are retired 20years+, investing solely in term deposits is far too conservative for that kind of timeframe for the vast majority of people.

chewy14 said :

dungfungus said :

chewy14 said :

The sense of entitlement seems exceedingly strong here.

The government will allow you to have $1.6million in tax free retirement savings in pension mode.
Above this, you will need to keep an amount in accumulation and pay a whopping 15% tax on inputs and earnings.

Yes, there will be some administration issues for people in defined benefit schemes but they are not major and can be dealt with through seeing a financial advisor if necessary.

And the author believes this is onerous?

He should look up to the sky and thank his deity every day that he is part of a generation and workforce (access to the CSS) that allowed such generous retirement conditions for workers that will never be seen again.

This is like someone complaining about having to work out where to put their money after winning the lottery.

Having been employed in the private sector or self-employed all my working life I never had the leg-up of a taxpayer funded defined-benefit pension that most public servants got/have. If that’s not an entitlement I don’t know what is. At least the government has now recognised the future worth of those (unfunded) “old CSS ” pensions by notionally capitalising the annual benefit 16 times to be added to the cap. It would appear that the OP thinks this is unfair.

My retirement is totally self-funded and to get there I worked hard and paid 15% tax on all contributions plus tax on all fund earnings up until pension phase. I don’t have nearly enough to allow this $1.6 million cap be an issue and if it was I wouldn’t have an issue in paying the extra tax but to infer somehow that this is like winning a lottery is nothing more that class envy.

By the way, superannuation invested in term deposits now will earn about 2.5%pa. which is one third of the rate available 10 years ago. Under the rules of a SMSF a contributor must withdraw at least 5% of the account balance annually. This means half comes from fund earnings and half from reducing capital which is not a good equation for living longer than 80 considering the spiralling costs of living in Canberra where the average wage is 50% higher than the rest of Australia. Consider that we seniors need constant dental treatment and this can easily exceed $10K a year.

I would swap this for an indexed CSS type pension any day. Then I would feel entitled.

My comment about winning the lottery, whilst facetious, was in two parts.

The first being the extremely generous conditions of the CSS, the government correctly recognised that these were not sustainable long term, which is why it was closed to new entrants.

The second being the still generous conditions of superannuation in general, with the new rules still providing a great tax vehicle to encourage people to save for retirement. Only having to pay 15% on earnings for the amount over $1.6million is more than reasonable.

Oh, and very few people should be invested solely in term deposits, there’s conservative and then there’s too conservative. Capital preservation is also unnecessary long term, the money is for your retirement not your beneficiaries inheritances.

Unless the money is preserved there will be no money for retirement so that’s why I am “too conservative”.

Besides that, I have quite a few colleagues who were getting great returns with all their super in equities just prior to the GFC. Most lost half their capital and some lost nearly all when it happened.

I have already stated the cost of living in Canberra is an impediment to making superannuation last so there is little chance there will be anything left for the estate to distribute. Anyhow, by then, whoever is in power will have a raft of “end of life taxes” to fund the rest of unfunded pensions due to public servants and their spouses.

dungfungus said :

chewy14 said :

The sense of entitlement seems exceedingly strong here.

The government will allow you to have $1.6million in tax free retirement savings in pension mode.
Above this, you will need to keep an amount in accumulation and pay a whopping 15% tax on inputs and earnings.

Yes, there will be some administration issues for people in defined benefit schemes but they are not major and can be dealt with through seeing a financial advisor if necessary.

And the author believes this is onerous?

He should look up to the sky and thank his deity every day that he is part of a generation and workforce (access to the CSS) that allowed such generous retirement conditions for workers that will never be seen again.

This is like someone complaining about having to work out where to put their money after winning the lottery.

Having been employed in the private sector or self-employed all my working life I never had the leg-up of a taxpayer funded defined-benefit pension that most public servants got/have. If that’s not an entitlement I don’t know what is. At least the government has now recognised the future worth of those (unfunded) “old CSS ” pensions by notionally capitalising the annual benefit 16 times to be added to the cap. It would appear that the OP thinks this is unfair.

My retirement is totally self-funded and to get there I worked hard and paid 15% tax on all contributions plus tax on all fund earnings up until pension phase. I don’t have nearly enough to allow this $1.6 million cap be an issue and if it was I wouldn’t have an issue in paying the extra tax but to infer somehow that this is like winning a lottery is nothing more that class envy.

By the way, superannuation invested in term deposits now will earn about 2.5%pa. which is one third of the rate available 10 years ago. Under the rules of a SMSF a contributor must withdraw at least 5% of the account balance annually. This means half comes from fund earnings and half from reducing capital which is not a good equation for living longer than 80 considering the spiralling costs of living in Canberra where the average wage is 50% higher than the rest of Australia. Consider that we seniors need constant dental treatment and this can easily exceed $10K a year.

I would swap this for an indexed CSS type pension any day. Then I would feel entitled.

My comment about winning the lottery, whilst facetious, was in two parts.

The first being the extremely generous conditions of the CSS, the government correctly recognised that these were not sustainable long term, which is why it was closed to new entrants.

The second being the still generous conditions of superannuation in general, with the new rules still providing a great tax vehicle to encourage people to save for retirement. Only having to pay 15% on earnings for the amount over $1.6million is more than reasonable.

Oh, and very few people should be invested solely in term deposits, there’s conservative and then there’s too conservative. Capital preservation is also unnecessary long term, the money is for your retirement not your beneficiaries inheritances.

dungfungus said :

Garfield said :

This is just part of the continuing saga of Australian governments of all persuasions getting super wrong.

Keating’s original model was biased against the self employed and levied additional surcharges on high income earners, despite the fact that super is for retirement and so tax should be levied on the amount accumulated at the time of retirement rather than the amount earned at the time contributions were made.

Then Howard simplified it, but at too big a cost to the budget given our ageing population.

Then Rudd/Gillard/Rudd complicated it again by reintroducing surcharges on high income earners, but lacked the knowledge or courage to actually reverse Howard’s changes.

Now under Turnbull its been even further complicated with this balance cap. I heard one person describe it as a reintroduction of Keatingesque reasonable benefit limits with a different name. There were also some positive changes for super as well, but overall it has significantly increased complication without collecting enough revenue from the truly wealthy with massive balances.

Shorten hasn’t announced any policies that would both improve equity and reduce complexity, so I don’t see the situation with super improving any time soon.

You conveniently did not mention that the “truly wealthy with massive balances” do not rely on taxpayer-funded pensions.

A person drawing a pension with $2m in super could expect to pay around $3,000 a year in tax if invested properly, not that I consider $2m as truly wealthy as you’d expect someone with that level of savings to draw a pension of $100,000 p.a. which I’d suggest is more upper middle class, but still quite comfortable in retirement. A person working full time and earning $37,000, just a fraction over the new minimum wage, would pay $4,312 in tax. There are people out there with $5m & more in super and I consider them truly wealthy. A person with $5m in super could still expect to pay a smaller percentage of their earnings in tax than that worker I mentioned.

The Age Pension is social security and as such is a safety net to try to ensure we don’t have homeless or starving aged people. Someone drawing $80,000 p.a. from their $1.6m in super and paying no tax doesn’t need the age pension. You could argue the small amount of tax collected from wealthy retirees now is forcing the government to take more tax from the current workforce, meaning the government will end up with a larger number of people dependent on the age pension in future years.

chewy14 said :

The sense of entitlement seems exceedingly strong here.

The government will allow you to have $1.6million in tax free retirement savings in pension mode.
Above this, you will need to keep an amount in accumulation and pay a whopping 15% tax on inputs and earnings.

Yes, there will be some administration issues for people in defined benefit schemes but they are not major and can be dealt with through seeing a financial advisor if necessary.

And the author believes this is onerous?

He should look up to the sky and thank his deity every day that he is part of a generation and workforce (access to the CSS) that allowed such generous retirement conditions for workers that will never be seen again.

This is like someone complaining about having to work out where to put their money after winning the lottery.

Having been employed in the private sector or self-employed all my working life I never had the leg-up of a taxpayer funded defined-benefit pension that most public servants got/have. If that’s not an entitlement I don’t know what is. At least the government has now recognised the future worth of those (unfunded) “old CSS ” pensions by notionally capitalising the annual benefit 16 times to be added to the cap. It would appear that the OP thinks this is unfair.

My retirement is totally self-funded and to get there I worked hard and paid 15% tax on all contributions plus tax on all fund earnings up until pension phase. I don’t have nearly enough to allow this $1.6 million cap be an issue and if it was I wouldn’t have an issue in paying the extra tax but to infer somehow that this is like winning a lottery is nothing more that class envy.

By the way, superannuation invested in term deposits now will earn about 2.5%pa. which is one third of the rate available 10 years ago. Under the rules of a SMSF a contributor must withdraw at least 5% of the account balance annually. This means half comes from fund earnings and half from reducing capital which is not a good equation for living longer than 80 considering the spiralling costs of living in Canberra where the average wage is 50% higher than the rest of Australia. Consider that we seniors need constant dental treatment and this can easily exceed $10K a year.

I would swap this for an indexed CSS type pension any day. Then I would feel entitled.

The sense of entitlement seems exceedingly strong here.

The government will allow you to have $1.6million in tax free retirement savings in pension mode.
Above this, you will need to keep an amount in accumulation and pay a whopping 15% tax on inputs and earnings.

Yes, there will be some administration issues for people in defined benefit schemes but they are not major and can be dealt with through seeing a financial advisor if necessary.

And the author believes this is onerous?

He should look up to the sky and thank his deity every day that he is part of a generation and workforce (access to the CSS) that allowed such generous retirement conditions for workers that will never be seen again.

This is like someone complaining about having to work out where to put their money after winning the lottery.

Garfield said :

This is just part of the continuing saga of Australian governments of all persuasions getting super wrong.

Keating’s original model was biased against the self employed and levied additional surcharges on high income earners, despite the fact that super is for retirement and so tax should be levied on the amount accumulated at the time of retirement rather than the amount earned at the time contributions were made.

Then Howard simplified it, but at too big a cost to the budget given our ageing population.

Then Rudd/Gillard/Rudd complicated it again by reintroducing surcharges on high income earners, but lacked the knowledge or courage to actually reverse Howard’s changes.

Now under Turnbull its been even further complicated with this balance cap. I heard one person describe it as a reintroduction of Keatingesque reasonable benefit limits with a different name. There were also some positive changes for super as well, but overall it has significantly increased complication without collecting enough revenue from the truly wealthy with massive balances.

Shorten hasn’t announced any policies that would both improve equity and reduce complexity, so I don’t see the situation with super improving any time soon.

You conveniently did not mention that the “truly wealthy with massive balances” do not rely on taxpayer-funded pensions.

This is just part of the continuing saga of Australian governments of all persuasions getting super wrong.

Keating’s original model was biased against the self employed and levied additional surcharges on high income earners, despite the fact that super is for retirement and so tax should be levied on the amount accumulated at the time of retirement rather than the amount earned at the time contributions were made.

Then Howard simplified it, but at too big a cost to the budget given our ageing population.

Then Rudd/Gillard/Rudd complicated it again by reintroducing surcharges on high income earners, but lacked the knowledge or courage to actually reverse Howard’s changes.

Now under Turnbull its been even further complicated with this balance cap. I heard one person describe it as a reintroduction of Keatingesque reasonable benefit limits with a different name. There were also some positive changes for super as well, but overall it has significantly increased complication without collecting enough revenue from the truly wealthy with massive balances.

Shorten hasn’t announced any policies that would both improve equity and reduce complexity, so I don’t see the situation with super improving any time soon.