Stuffing around with super

Where is Wayne Wood when I need him? On first glance, Federal Treasurer Peter Costello’s plan to encourage intending retirees to keep working, and take their superannuation as a pension rather than a lump sum, may completely stuff (my wife) Jenny’s and my longstanding early retirement plans: –

The government would also allow over-55s to access their super even if they wanted to keep working, from July 2005, but only as a pension and not a lump sum.

We had planned that Jenny would take early retirement when she hits 55 next year, but then keep relief teaching. She was going to take her super as a lump sum and use it to reduce the mortgage on one of our rental properties (in order to provide a reasonable net income flow from it). Then I was also planning to take early retirement in 5 years or so, also keep lecturing on a casual basis, and also contribute my super lump sum to further reduce (in fact completely eliminate) the remaining borrowings on our rental investment properties. The combination of these and a couple of other plans will (or would have) seen us entirely debt-free by the time I was eligible to take early retirement, with a comfortable self-funded retirement income enough for both of us (whether living separately or together).

However, if the law is going to be changed to prevent us from taking our super as lump sums, even though we won’t be doing so in order to make ourselves eligible for a publicly-funded age pension, our retirement plans are utterly disrupted. Please tell me I’m misreading it all, Wayne!! Why do the pricks keep continually messing around with superannuation laws? Don’t they understand that Australians rely on these rules and put in place retirement plans over a long period of time that can’t readily be changed, especially as the retirement date becomes imminent?

On a slightly different topic, the same story quotes the following mind-boggling statistics:

He [Costello] said the welfare system did not properly encourage lone parents and disabled people to work, saying one in eight men aged between 50 and 64 were on a disability pension and just one in 10 parents in jobless families were required to look for work to receive income support.

If true, these figures rather suggest that perennial leftie protests about the evil heartless economic rationalist Howard government and its mutual obligation rhetoric and “work for the dole” schemes are a trifle exaggerated. If the figures are correct, then large numbers of malingerers should be kicked off disability pensions, because the proposition that 12.5% of blokes between 50 and 64 are incapable of working is laughable.

I’m a bit more equivocal about pushing sole parents into the workforce, and certainly don’t think they should be pressured until all their children have reached school age. After that, however, I can’t think of a compelling argument in favour of single parents being entitled to choose to live a life of (relative) leisure at taxpayer expense.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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2022 years ago

Don’t panic Ken! Believe it or not the proposed alterations maybe an improvement on the existing system. Rosemary’s reaction (she’s in the same situation as Jenny) was the same as yours, “they are forever changing the system”.
Why do the pricks keep continually messing around with superannuation laws? Don’t they understand that Australians rely on these rules and put in place retirement plans over a long period of time that can’t readily be changed, especially as the retirement date becomes imminent?

Firstly, anyone who uses the superannuation system for the major part of their retirement savings will always be subject to the vagaries of legislative change; and the rate of change will accelerate rather than reduce, for all the reasons discussed in my post above. Secondly, the system is so hard to understand in part because the legislation is usually not retrospective. Consequently, those over 55 now shouldn’t be unduly influenced by the new rules and those who turn 55 after July 2005 (assuming the Government hasn’t changed and the legislation passes the Senate) will simply have to cease work in order to access their super as a lump sum – which is what Jenny intended to do anyway.

As far as I know there is no impediment to returning to relief teaching (or any other work either full or part time) after retirement and collection of a lump sum. I think the pollies do it all the time; look at all the jobs for the boys given to ‘retired’ CLP politicians. There appears to be acceptance of the Friday afternoon/Monday morning approach to cessation/recommencement as it is applied to retirement.

So I suggest (note this is not advice because I’m not qualified to give it) would be to find out if the new arrangements will prohibit re entering the workforce after retirement, and if so, determine what changes to your situation are necessary so that, if the legislation is passed, you (and Jenny) won’t be disadvantaged. Doesn’t that sound like something Sir Humphrey would’ve said ?

BTW, give me a ring and you can pay for the aforesaid suggestion by taking me to lunch.

Ken Parish
Ken Parish
2022 years ago

How disappointing. I had hoped that publishing a simple RDWB rant about lazy single mothers and bludging 50 year olds on disability pensions might provoke an interesting (if probably somewhat predictable) debate. But it didn’t. So perhaps I should spell out some of the nuances in the hope of stimulating discussion.

Of course, there are numerous dimensions to all this. One is that Costello’s throwing of the single parent/disability pension bludger issue into the debate is almost certainly (a) a code emssage for conservative voters to remind them that the Coalition is tougher on the bludgers than Labor; (b) an attempt to get the broad political debate away from the ALP’s strengths of health, education etc and back onto the Coalition’s territory of economic management.

It’s also interesting that Costello raised the issue of low labour force participation rates for single parents etc, without mentioning the huge problem of the punitive effective tax rate for such people re-entering the workforce, despite the fact that we know Howard has a report and draft policies dealing with precisely that problem. Do they intend launching a policy to address it? Or will they throw all the spare money into delivering a big(ish) tax cut? Or will they simply keep trying to demonise the unemployed and single parents etc to create a wedge issue. I suspect Howard will probably attempt to achieve all three objectives. A really effective policy to address barriers to re-entering the workforce would cost several billion dollars, however, and probably preclude a large tax cut. Consequently, I suspect Howard will deliver a half-baked and inadequate policy in that area, so as to leave enough of a surplus to still deliver an attractive tax cut. He’ll then try and demonise the unenmployed (in code) as well.

The superannuation policy Costello announced yesterday similarly bears the hallmarks of a deliberately cheap, partial solution adopted in order to hold back enough money to deliver a tax cut as the election date gets closer. It will be fascinating to watch how Latham responds. So far he’s shown far greater tactical and strategic nouse than I thought he possessed.

2022 years ago

The problem, Ken, was that all the exciting stuff was in the continuation. The vast majority of your readers would never have got past the eye-glazing word “superannuation” to click on the continuation. I skipped the first time, even though I’m old enough for it to be personally relevant, and professionally obligated to talk about it.

On the subject of older males and the disability pension, I’ll be doing a Perspective for Radio National sometime next week.