2% Drawdown on Super in Pension Phase for 21/22??

Hi All.
The special drawdown rate for this financial year is 2%, but with low rates of return on fixed income products and cash, retirees will be eating into their pension balances more than desirable and possibly leading them into earlier access to govt pension. Is it justifiable to lobby govt to continue the 2% drawdown rate for the next two to three years? It does look after those self funded retirees who have assets to draw on outside of super. Any thoughts?

 

Its possible but really at 2% the capital preservation is negligible. And a present earning rates ...who cares?

 

You know you’re supposed to eat into capital. What’s the point of dying with hundreds of thousands or millions in capital?

The part age pension is still so generous that it’s very very difficult to run out of money.

Additionally, just because you draw down money from super, doesn’t mean you have to spend it either.

Finding it very difficult to understand your argument here.

 

Why would retirees invest their total pension balances in fixed income products and cash?

Surely, they would only have 2 to 3 years pension payments in such products.

What about people losing 30%+ of their pension balances in a month earlier this year due to the COVID crash?

 

Plenty of retirees do regardless of the pitiful cash rate. Once burnt on the "share market", twice shy for many of them.

 

So they get totally cooked investing in cash .

Last 12 months, shares returned 13.14% and cash < 1%

As I posted:

 

Because they are making emotional choices, not economically rational decisions.

 

But they know better and it's SANF afterall, you never know when you need access to $5M and you can't pull that out of your share portfolio that quickly

 

In my opinion, having a moderately conservative portfolio of assets addresses both issues where some exposure to growth assets allows capital growth and cash/fixed income assets provides liquidity. This can assist in softening the impact of inflation on cashlike securities as an overall effect.

 

Many self funded retirees are investing into bank hybrids, income ETFs (VAS / VGS etc), bank shares and the like to achieve reasonable income. The growth element since March has also been reasonable but I fear it could mislead some who think capital protection is assured. Much of the growth is recovery from low's when covid first impacted. eg look at bank hybrids (etf = HBRD) which rocketedsince March and they are meant to be fairly capital stable otherwise.


Cash other than for liquidity is very unusual in SMSFs now (ie cant say when I last saw a term deposit). Most who have a limited recourse borrowing also use offsets effectively.

 

I must be the only one who hangs out with old, conservative, risk adverse old people who then complain about how low the interest rates are.