Managing director of NetActuary, Brian Bendzulla says he is concerned that retirees will see that their pension has reduced following the changes with the new asset testing, and consequently make significant changes to their retirement planning which could be inappropriate in the long term.
“I think this whole area is simply too complex. I feel very sorry for pensioners see that their pension has gone down with the new test, and they’ll perhaps make the wrong decision,” Mr Bendzulla told SMSF Adviser.
“[It] doesn’t really allow them to work out how they need to change their plan for retirement income. Using more of your personal assets now means you get more pension sooner. Aged pensions vary so much as thresholds go up and personal assets come down. It’s a terrible system.”
Pension systems in Canada, New Zealand and the UK work more efficiently as retirees know what they’re going to be paid as a pension, he said.
“Overseas jurisdictions really just cut out all the bureaucracy of Centrelink, pay everyone a pension and the rich claim it back through the tax system, because the pensions are not accessible income,” Mr Bendzulla said.
“This would be a radical change [however] as what we’d have to do is pay the SG contribution across to the government in exchange for a non-means tested aged pension. It would solve their budget problem though.”
“We really run a huge Centrelink bureaucracy and a huge tax bureaucracy, we actually don’t need both, we can use one to do it.”
Mr Bendzulla said the new changes to the aged pension system were “most unfortunate” and he would like to see a “kinder and simpler system”.
“It’s fine and proper to put limits like the $1.6 million, but I think it’s most unfortunate where the aged pension gets tinkered around with,” he said.
“I think that’s the real one where you need stability. Personally, I think the government has misjudged it. I think there’s going to be a lot more heat when retirees actually look at what’s affected and what’s happening with the credit across to their bank account.”
Mr Bendzulla stressed that practitioners should ensure, that when clients look at their retirement income sustainability level, not to base these decisions solely on short-term changes in their aged pension.
“Take into account the offset that you’ll get more aged pension sooner rather than later. You’ve got to look at the whole totality of your planning duration to get it correct,” he said.
“I’d hate for someone who was receiving $18,000 before and are now getting $8,000 to think they need to cut their retirement income by $10,000 when they probably only need to cut it by $2,000.”
The only winners out of Centrelink are the phone companies. In the 2010-11 Annual Report, Centrelink fielded 37 million phone calls, over 25 call centres. The system is being jammed up with about 4 million aged pensioners, all having to report their incomes & assets. In the 2015-16 Annual Report, Centrelink employs 2300 staff costing $328 million pa. This is ridiculous. When you hear the “can’t give money to millionaires baloney”, you are really hearing clever sales spin in defence of why this expensive bureaucratic system should continue. The New Zealand universal aged pension leaves the Australian system for dead.
Good Article!!
The feedback I get from my clients leads me to think you will see a massive exit of Liberal Voters in the 60+ age group come election time and their vote will not be going to Labor either??
“Please Explain””!!!
Brian has hit the nail on the head, get rid of this bloated system, (Centrelink) Pay all people from pension age a pension and then do what the New Zealand Government do, tax any additional income at 15%. This has kept a lot of small business going either as self employed or for them to employ retirees. The system works much better and is 100% cheaper than here in Australia. You don’t need to be a genius to figure that out. As a now retired adviser I would advice all per-retirees to retire overseas as it is 50% cheaper than Australia.
There is growing demand for reverse mortgages to fill the gap created by the reduction in the assets test, particularly in light of maintaining existing assets and accessing the capital growth achieved over the past 5 years