Retirement
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans.
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans.
AIR president Wayne Strandquist said retirees who partly or fully fund their own retirement “have suffered significant income reductions as a result of the adverse economic impact of COVID-19.
With these retirees relying on income from investments in the sharemarket, property and fixed interest, either through superannuation or private investment for their living expenses, he said “they have been overlooked by the government as billions of dollars have been allocated to programs to stimulate employment and the economy”.
Mr Strandquist argued that “retirees are not requesting special consideration but are seeking fairness in government support along with the rest of the community while COVID-19 continues to seriously impact the economy”.
“Since 1992 when compulsory superannuation was introduced, retirees have been encouraged to accept the risk of funding their own retirement to reduce government outlays on the age pension,” Mr Strandquist noted.
He outlined how a large percentage of Australia’s $3,000 billion superannuation portfolios is invested in companies that are themselves struggling to survive the impact of COVID-19, which is forcing reduced or nil dividend payments.
This “is causing considerable reductions in earnings for retirees”, Mr Strandquist added.
Compounding the income loss is APRA’s recent guidance to banks to cut dividends to offset potential defaults in mortgages held by the banks.
“With retirees traditionally having significant investments in bank shares this guidance by APRA means that retirees have been unfairly called upon to forgo dividend income to support bank mortgage defaults,” Mr Strandquist considered.
The president acknowledged that retirees generally seek a conservative investment portfolio with a reasonable allocation to fixed interest investments.
But with official interest rates near zero per cent, “retirees are now forced to consider riskier investments and draw down increasing amounts of their capital to fund their retirement”.
“The impact of COVID-19 on the economy has been unprecedented and well beyond the capacity of retirees to bear all the downside risk that has occurred,” said Mr Strandquist.
AIR is therefore seeking the support of the government to make available a range of support measures “to assist retirees to come though the COVID-19 crisis and continue to fund their own retirement”.
Mr Strandquist has suggested the provision of offset assistance, the issuing of government-backed infrastructure bonds for retirees, a reduction of the deeming rate, and reducing the age pension asset and income test taper rate as some of the ways self-funded retirees can be better supported.
AIR is also calling for an introduction to continuous Centrelink valuation of assets for deeming and threshold purposes, more super drawdown flexibility for retirees over the age of 75 and an increase to the threshold for receiving the CSHC card.
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