Addressing the SMSF Association National Conference 2021, shadow financial services minister Stephen Jones said Prime Minister Scott Morrison had “dropped” self-funded retirees “like a hot potato” despite the Coalition’s campaign against Labor’s “retiree tax” on franking credit refunds being critical to getting Mr Morrison re-elected in 2019.
“We support the steps taken by the RBA to keep the cash rate at an historic low, which has been critical in helping households and businesses through the crisis, [but] unfortunately most of the talk we hear about the benefits of low interest rates don’t tell the whole story,” Mr Jones said.
“If we think of it as a net shift in wealth from savers to borrowers we can understand there will be one group worse off – self-funded retirees. One of the big reasons Scott Morrison is Prime Minister today is because of self-funded retirees, but it seems post election he’s dropped them like a hot potato.”
Mr Jones said the Coalition had taken “too long” to lower the deeming rate for pensioners in line with ultra-low interest rates, and that current rates to access the government’s pension loan scheme that facilitated home equity release for retirees were also too high.
“At 1 per cent the deeming rate for small investments now sits alongside the cash rate, but for too long it remained well above the rate consumers would hope to get from term deposits,” Mr Jones said.
“The same can be said for the rates the government charges retirees to access the pension loan scheme – if low rates are to be a feature of the future, we’ll have to reassess our assumptions of what’s adequate to sustain retirees over the long term.”
He also pointed to exaggerated assumptions that had been used in the retirement income review to assess the current SG rate as adequate, saying the Prime Minister would “breach a promise” made at the previous election if the government went ahead with freezing the next SG increase or making it optional.
“What we can’t understand [in the review] is the finding that 9.5 per cent was adequate when it’s not supported by the data,” Mr Jones said.
“We dug into the assumptions used in the review to come up with that finding – a 4 per cent annual wage increase over the long term, 7 to 8 per cent real return on funds and a consistent 40-year working life.
“Those assumptions haven’t been true over the last few decades and they aren’t going to be true in the next few decades.”
As outlined clearly in Treasury’s Explanatory Memorandum to the Haynes No 2 bill, the Liberals in the Lower House have just voted to increase bureaucratic red tape on retirees by $30 million pa, forever, by voting for the annual fee renewal legislation, along with FPA support. And Labor said nothing about this massive fee increase in their reply speech. So much for slashing costs for consumers lol
It’s an encouraging sign that the Pension Loans Scheme interest rate has become a political issue. Implies it must have reached a critical mass of awareness and usage!
Stephen, I have 75 years worth of data…wages have averaged 4% during that time. Yes, it is variable and tracks inflation to some extent – but it’s 4%…the exact number udes by SCOMO and crew. 7-8% is about right. The same 75 years worth of data revealed average house price increases of between 8-9% depending on which state or territory you were observing. Yes, these are averages and track changes in State Based Domestic product to a larger extent than they do inflation. To suggest that these figures arent going to be reflective of the next few decade is disingenious. What inflation rate are you (Stephen) basing your observations on? IF, because of all the government stimulus around the word, and the involvement of ongoing hand-outs to the public ‘for-no-value’ continue – this is the very definition of inflation. Couple this with unemployment (caused by the shut downs) and you have a very real probability of returning to much higher inflation rates, followed by much higher interest rates. In turn, higher interest rates and inflation lead to higher returns on the investment markets and eventually higher wages…lets have your theory Stephen!
Stephen, remind us again of how you are qualified to talk about financial advice. Since 1993 you have been either a union official or ALP member. And we wonder why the regulations this industry is facing are a dogs breakfast.
Where do I start? You lost the last election by abandoning retirees and now you blame the other side.
Your policy to stop insurance commissions will create lots of impoverished people and later on retirees, because they never bought life or disability insurance and are relying on the disability pension, impoverishing the Australian government.
Your punitive demands to create ever more red tape make financial advisers unable to serve low and middle income Australia, your core constituency. I’ll stop there.
“We dug into the assumptions used in the review to come up with that finding – a 4 per cent annual wage increase over the long term, 7 to 8 per cent real return on funds and a consistent 40-year working life.
“Those assumptions haven’t been true over the last few decades and they aren’t going to be true in the next few decades.”
Actually, Stephen, these assumptions are pretty much right if you care to go and have a look at the data. While wages for the same job don’t increase by 4%, people upskill and get promotions. 7-8% real returns are about right if invested properly. Most people start work around aged 20/25 and finish around 60/65.
Maybe these assumptions won’t be true if you get hold of the economy, but they are ok by me.
…and we’re ‘trusting’ this numpty with financial matters when he cannot even get his subtraction right…. 65-25=40 or in Stephen ‘I-can’t-add-or-subtract’ Jones it must be something like 65-25 = 15%
LOL. So Labor were going to steal retirees franking credits in 2018, and will be their best friend in 2021?
Pigs might fly. Being a retiree does not make you senile. Their memories are long.
Hmmm. Not wanting to defend Mr Jones, but I think there is actually a reasonable correlation between retirement, senility, and memory loss. (And denial of it).