by Alan Thornhill
Although many Australians are still retiring early, a substantial number are now planning to stay in the workforce until they are at least 70.
This is shown in new data, that the Bureau of Statistics released today.
The Bureau noted that almost one in five Australians, who intend to retire, now plan to do so when they are 70, or older.
The Bureau’s study follows a controversial report, by the Productivity Commission, saying the pension age may have to be lifted to 70, as Australians are now living longer.
Its survey showed that 50 per cent of the Australian men, who were retired in 2012-13, had left the nation’s workforce, while they were aged between the ages of 55 and 64.
Half of the remainder had left before their 55th birthdays.
And the rest had left on or after their 65th.
Retirement, for women, often comes earlier than it does for men.
The Bureau noted that 55 per cent of the nation’s retired women had left the workforce before they were 55.
It said 36 per cent had retired when they were aged 55-64.
And just 9 per cent had stayed on until they were 65.
The Productivity Commission urged the Federal government to study the increases in health and social security costs, that will come with an ageing population.
It also warned that, if they don’t act now, Australian governments would, collectively, face extra spending on health, aged care and the Age Pension, equivalent to 6 per cent of national GDP by 2060.
However a critic, Dave Roberts, said in a letter to the Canberra Times, that the Commission’s report “is a typical suggestion from a bunch of well-paid white collar public servants in their plush ivory tower.”
“Why don’t they go out and ask brickies, farmers etc how their bodies are holding up at 65 and whether they can work another five years?” he asked.
by Alan Thornhill
Deeming accounts are not always what they are deemed to be.
That advice comes – very bluntly – from Australia’s corporate watchdog, the Australian Securities and Investments Commission.
The Commission has some tough observations to make about some Australian banks and other deposit taking institutions.
It said they are: “…using the term ‘deeming account’ to promote a basic savings account to pension recipients.
“These accounts have been marketed as having a connection with the Government’s ‘deeming rules’, which form part of the Government’s social security income test.”
However the Commission said the way these accounts are advertised “could mislead consumers.”
“These accounts have been marketed as having a connection with the Government’s ‘deeming rules’, which form part of the Government’s social security income test,” the Commission said.
But it warned: “In most cases, the savings accounts offer lower interest rates than the deeming rates, particularly for lower account balances.”
ASIC did not name either the banks or the other deposit taking institutions that it said are misleading their depositors in this way.
But it said ASIC is particularly concerned the name of the account could mislead consumers into believing the interest rates on offer would be the same as the deeming rates.
“ASIC was also concerned about consumers being unable to clearly identify the interest rates that apply to different account balances, known as ‘banded’ or ‘tiered’ interest rates,” the Commission said in a statement.
Its Deputy Chairman Peter Kell said that when offering financial products to consumers, it is important that they are true to label.
‘Special care should be taken when using terms which will have a particular connotation to consumers, to ensure that the product characteristics are consistent with the representations inherent in the product name,’ Mr Kell said.
The Commission said it has been working with the industry to address these concerns.
And progress had been made
Following discussions with the Australian Bankers’ Association (ABA) and the Customer Owned Banking Association (COBA), industry has agreed that members offering these products will work to ensure:
• the word ‘deeming’ is not used in a savings account name where that might mislead consumers about the interest rates being offered
• features of these accounts are not described as being ‘comparable to’, ‘compatible with’, ‘guided by’, ‘reflective of’ the Commonwealth Government deeming rates where this is not the case, and
• where ‘banded’ interest rates are offered, this is clearly disclosed, and information about different bands and applicable rate made easily accessible to consumers.
ASIC said it will continue to work with the ABA and COBA to ensure these measures are implemented.
by Alan Thornhill
The Federal government wants to hear your views on its plan to tighten control of the nation’s superannuation funds.
To achieve this, the Federal Treasury has published a discussion paper today on that plan.
It can be downloaded from www.treasury.gov.au. (Go first to Consultations and Reviews, on the left hand side, then to the sub head Consultations and Submissions, to find the paper)
The Assistant Treasurer, Senator Arthur Sinodinis, says the Abbott government is committed to improving regulation and governance and enhancing transparency in the superannuation system, “while keeping our pledge not to make unexpected or detrimental policy changes.”
The paper says feedback is sought on the governance and transparency issues contained in the government’s superannuation election commitments.
Key questions relate to prudential standards, investment options and product dashboard issues.
by Alan Thornhill
Dave Roberts has firm views on the Productivity Commission’s suggestion that it may be necessary to push the pension age up to 70, to protect Federal finances.
In a letter published in The Canberra Times, Mr Roberts, says the Commission’s report, containing that recommendation: “…is a typical suggestion from a bunch of well-paid white collar public servants in their plush ivory tower.”
And that’s not all Mr Roberts, who lives in the Canberra suburb of Dickson, has to say on the matter.
He has a suggestion of his own.
“Why don’t they go out and ask brickies, farmers etc how their bodies are holding up at 65 and whether they can work another five years?”
True, the ACTU – and member unions – made much the same point, in their response to the commission’s report.
But Dave Robert’s eloquence put them all to shame.
He has supporters in surprising places, too.
The Nobel Prize winning economist, Paul Krugman, is one.
Mr Krugman wrote a blistering commentary on a US proposal to lift America’s retirement age, which is currently 66 to 67 – “because people are living longer.”
“This sounds plausible,” Krugman says, “until you look at exactly who is living longer.
“The rise in life expectancy, it turns out, is overwhelmingly a story about affluent, well educated Americans.
“Those with lower incomes and less education, at best, have hardly seen any rise in life expectancy at 65; in fact those with less education have seen their life expectancy decline.
“So this common argument amounts, in effect, to the notion that we can’t let janitors retire because lawyers are living longer.
“And low income Americans, in case you haven’t noticed, are the people who need social security most.”
The Productivity Commission didn’t have a lot to say about, precisely who, in Australia can now expect to live longer.
It relied, almost entirely, on broad population figures, produced by the Bureau of Statistics.
A reputable source, certainly.
But there is one big problem with stats, everywhere.
There is never enough detail.
And – as as both Mr Roberts and Mr Krugman have shown – that can be very important.
by Alan Thornhill
The Productivity Commission says the pension age may have to be lifted from 65 to 70.
In a report released today, the Commission urged the Federal government to study the increases in health and social security costs, that will come with an ageing population.
It said Australians are living longer now than they did in the past.
It also notes that old people are often asset rich, but income poor and suggests that the Federal government should consider guaranteeing reverse mortgages for them, to help them live more comfortably in retirement.
The Commission says: “Australia’s population will both grow strongly and become older.
“Such slow but profound shifts in the nature of a society do not elicit the same scrutiny as immediate policy issues.
“The preferable time to contemplate the implications is while these near inevitable trends are still in their infancy.
The Commission takes a positive view.
It says: “Population ageing is largely a positive outcome, primarily reflecting improved life expectancy.
It says a girl born this year will, on average, live to 94.4.
And boys will live to 91.6.
But it adds: “Collectively, it is projected that Australian governments will face additional pressures on their budgets equivalent to around 6 per cent of national GDP by 2060, principally reflecting the growth of expenditure on health, aged care and the Age Pension.”
by Alan Thornhill
Many veterans and service pensioners can look forward to receiving a little extra money, because the Federal government is cutting its deeming rate.
The Minister for Veterans Affairs, Senator Michael Ronaldson announced today that the rate would be cut from 2.5 per cent to 2 per cent for total financial investments up to $46,600 for single pensioners or $77,400 for a couple.
He said the upper deeming rate would also decrease, from 4.0 per cent to 3.5 per cent for balances over these amounts.
The first full pension payment calculated using the new deeming rates will be on payday 28 November 2013, Senator Ronaldson added.
He said the payment on 14 November will be calculated partly using the previous deeming rates and partly using the new deeming rates.
“The reduced deeming rates will benefit service pensioners and income support supplement recipients who receive less than the maximum rate of pension due to their income.
The average increase is around $8.00 per fortnight,” Senator Ronaldson said.
by Alan Thornhill
The National Australia Bank has declared a statutory net profit of $5.45 billion for 2013.
That was an increase of $1.4 billion or 33.6 per cent on the September 2012 year.
In a statement to the Stock Exchange, the bank also said its cash earnings were $5.94 billion, an increase of $503 million or 9.3 per cent on the September 2012 full year.
It said this was due to higher earnings from all banking businesses.
The bank said the difference between net profit attributable to owners of the Company and cash earnings was primarily due to fair value and hedge ineffectiveness, the effects of adjusting for treasury shares and a $163 million (post-tax) provision raised for costs associated with
UK payment protection insurance.
The bank’s CEO, Cameron Clyne, said: “The Group’s full year results show an improved performance across most business units, combined with solid progress against our simplification and digitisation agenda.”
Mr Cameron also said: “Some improvement in the UK operating environment and initiatives to reduce the Australian risk profile have supported a lower charge for bad and doubtful debts.
“Costs, excluding Australian restructuring and UK conduct-related costs, have been well contained, reflecting our ongoing focus on efficiency gains.
“Enhancing the Australian franchise remains a strategic priority, with further progress made during the year.
“Personal Banking again produced a strong result on the back of good momentum in housing lending and increased customer deposits,” Mr Cameron said.
by Alan Thornhill
Self funded retirees have faced some of Australia’s steepest increases in living costs, over recent months.
The Bureau of Statistics reports that their living costs rose by 1.5 per cent in the three months to the end of September.
This rise was almost twice that – of 0.8 per cent – seen in the living costs of employed Australians over the same time.
But age pensioners also saw a substantial rise – of 1.3 per cent – in their cost of living in this time.
The overall cost of living, for all Australians, rose by 1.2 per cent in this period, on the consumer price index scale.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Thursday December 12
Holden will stop producing vehicles in Australia in 2017. Toyota likely to follow suit
Unemployment figures for November to be released at 11.30am
High Court to rule today on a Commonwealth challenge to an ACT law permitting same sex marriages. About 30 couples directly affected
The Federal Treasurer, Joe Hockey, says the Mid-Year Economic and Fiscal Outlook will be released next Tuesday, at the National Press Club.
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