Retired, Equity a plenty, Living off the pension.

I see your point and I agree this future is possible. I just don't see any link between robots doing this work and humans being out of work. That would only happen if the number and types of jobs remained static over time and we know they don't. So people will just invent more and more pointless busy work for people to do. People didn't evolve to be idle, so they will find or make work to do. It will be great when robots take over the menial work though to free up people to hopefully find something meaningful to do.

 

No, same question.

I sell my PPOR and withdraw money from super to buy an upgraded PPOR. My assets and income have now reduced to below the thresholds for the age pension.

Eligible? At least part pension?
Marg

 

Sorry- but it is a different question to your original proposition.

You first proposed to sell at least 2 assets ( your PPOR PLUS other investments) before upgrading your PPOR, in order to get around the asset test and qualify for a pension.

Now you are proposing to sell just 1 asset ( your PPOR ) before upgrading ... thats a different question.


And I have already answered this with as clear an answer as can be had, by providing you with information direct from the Centrelink website, which says the following is exempt - "proceeds from the sale of your principal home you intend to use to purchase another within 12 months. The funds will be used in the calculation of your financial assets to determine the deemed income under the deeming provisions"

You will note that any proceeds or profits from the sale of other assets are not included in this exemption. It's why I am being so pedantic about the 2 different questions you asked, and why I said that if you try and pour the proceeds from the sale of OTHER assets ( besides your PPOR) into a PPOR upgrade to try and beat the assets test and qualify for a pharmaceutical benefits card or part pension, you will find yourself in a different position than if you simply sell your PPOR and upgrade to another PPOR within 12 months.

 

My original post referred to cashing in investments. In my case it is superannuation that we are entitled to withdraw and presumably spend as we please.

How would this be treated if we used it to upgrade our PPOR and then fall below maximum threshhold.
Marg

 

Lets look at two situations

Person A - Earns 100k p.a. but enjoys the good life, travelling, eating out at nice restaurants, gambles but has nothing at retirement collects the pension.

Person B - Earns 100k p.a. lives a modest lifestyle and instead invest their money in property and shares. When they come to retirement they have a portfolio worth 10M (1M PPOR) but are ineligible for the pension because they have to many assets.

Person C - Earns 100k p.a. and buys a really nice house and upgrades time and time again and comes to retirement and the house is now worth 3M.

All people earned the same amount of money but the life choices of person A allowed them to collect the pension. Person B is unable to collect due to their assets even though they received the same money. Person C is allowed to at the moment however if you include the PPOR in testing they will not be eligible. If you do a reverse mortgage on PPOR then Person C is worse off.

Further lets say the person B or C is 1 year from pension age and we include the PPOR in the pension assessment, so they both go to the casino and gamble it and put it all on red and lose. Now they are eligible you might call it unfair however Person A had a good life and didn't look after their future and still receives payments where as Person B & C spent time looking after their future but wont receive any funds but they didn't get to enjoy the good life like person A and had to take risks.

Remember humans will always take the way that gives them the most benefit if you start introducing reverse mortgages for the pension people will sell of 'gift' their home to their kids before the asset test.

If you made it so that for every dollar you draw down the property the government will contribute the same (e.g. $1 for $1) then maybe. However simply penalizing people for sacrificing their income and going without is not the way. Instead we should be rewarding the right behavior that is why I feel just give everyone a pension (including Rina) and the people who worked hard and invested their money get a better lifestyle in the later years.

 

I agree that would be the most equitable system, but I'd have to ask: where's the money coming from to fund a pension for everybody with no exceptions?

As I was watching the election coverage over the weekend, Arthur Sinodinos (who's a knobhead, but disregarding that) made what I thought was a fair point RE budget deficits:

He mentioned that people surveyed consistently agree there's a budget problem. They hate deficits, they want to balance the budget, bring us back to surplus etc. Unanimous agreement there.

When the same people are surveyed as to possible solutions (i.e cuts to things, raising of taxes) nobody wants a bar of it. People want more funding for everything and at the same time want the budget to be balanced, which is practically impossible.

 

Refer to my earlier post on page 2 of this thread.

 

The scaling dole payments - good change, but in saying that, is the number of people abusing the dole and other government payments (and who this would crack down on) really that high? Would this actually result in much of an increase in revenue? Hard to tell. My gut instinct is that most welfare is for people who are intermittently on it, not long term dole bludgers. Either way some change in this area isn't a bad thing.

Raising GST to 15% or 20% - while I personally would support a change to GST/Income Tax, keep in mind that this won't work because you're increasing the cost of living for the poor. Yes, you give them a tax break by removing income tax, but they pay hardly any as it is, so they'd be worse off. I think people generally like the income tax system as it's progressive - not so much with the fuel excise tax and GST.

Pension rate for those below 60 - isn't the age limit on the age pension already around 65+? Not sure I follow what you meant by this one.

 

Pensioners sitting on millions of PPOR equity claiming welfare are no different to dole bludgers who do everything they can to get out of working.

When will people get through their heads the pension is not a "reward" for working hard and paying taxes your whole life. The pension is welfare for those in need. Your "reward" for working hard is your salary and superannuation, government doesn't owe you damn cent. As for paying taxes- well duh, those taxes are used to fund the infrastructure and services you've made use of all you life and it's a bit rich saying you "deserve" some it back because you "worked hard".

No one is saying force old people to sell, as has been mentioned a reverse mortgage could fund their lifestyle if they insist on staying in their mansion instead of downsizing.

Again for those that are confused- Pension is welfare for those in need to survive, not a "reward"

 

Lets keep it real simple....

Person A - Earns 160k p.a. as a self employed person, doesn't put any money into Super and doesn't buy any assets and has a great time.

Person B - Earns 80k p.a. from their Job and gets super paid for but isn't enough but they bought a house worth 500k (today's dollars).

So Person A gets the pension (for doing the wrong thing), Person B also gets the pension but instead has to draw down against the property they spent money paying a mortgage for their life.

Tell me again how this is rewarding the correct behavior?

If you make it so people need to draw down their property why should they buy property to begin with?

 

I agree that it might hurt minimum wage earners in take home pay however the people who spend the most amount of money are higher incomes earners. It also stops the cashie jobs as everything is getting taxed and people who visit our great country also help contribute (like I do when I go to the US or UK).

I am a looooooong way from the pension (not even 1/2 way in my life to the pension day and by the time I get there it will likely be 75 or something... I plan on getting myself into retirement before then.

Since super came in in 1980s you cant penalize those who were 40 (now 76) by saying you get a reduced pension and rely on you super as they only had 20 years to save in super. However if you had 40 years super you should be able to supplement your lower pension with your super contributions. Hope that clears it up

 

Good luck making people realize that...

 

Again with the "reward". fallacy The pension/government is not there to reward or punish your lifestyle choices. If Person A has not saved anything for retirement and they need a pension to survive then I don't have an issue with them getting it, surviving on low pension payment is not exactly a reward as you try to make out.

Likewise Person B, if they can self fund themselves then why should tax payers fund them even more just to appear "fair".

Life is not fair, some people will save, some will blow everything, some will have bad luck others good. Regardless it's not the governments job to pick winners and try and make things "fair". The only thing that is truly fair and sustainable is welfare goes to those that really need it and not to those that don't, irrespective of the reasons why.

 

Yeah, unfortunately it's seems a pretty ingrained mind set in this country, especially with the older generations. The thought that working tax payers should fund the lifestyles of property rich pensioners on the premise they "deserve" it is pure selfishness. Maybe that works in fairyland where governments have unlimited funds but with in the real world it is unsustainable. As for the suggestion that raising taxes even more to fund this, lol just lol.

 

IMHO, I think you are re-writing history here a little bit. Prior to the 1970's, the Goverment mantra used to be "work hard, pay your taxes and we will after you in retirement".

So, for anyone over say 70, it is a bit rough to start forcing them into reverse mortgages, downsizing PPOR, etc as they were expected to be looked after by the Government in their retirement. It is NOT welfare.

For the younger Baby Boomers, all Gen X's and anyone younger, then yep, make it harder for them as it is now welfare.

 

Source?
I find it hard to believe that even before super came in it was expected that people should not save at all for their retirement and 100% rely on the government. I always find it amusing those trying to claim people working pre super days deserve the pension because they didn't save for retirement. Just because a forced saving scheme was not in place doesn't mean you couldn't do the responsible thing and put away.

 

Both @Big Will and @Plucka make some decent arguments both ways.
Since starting this thread it has been really interesting to read views from both sides.

Will in your example I think the 3 groups just chose to enjoy life in reverse.
Person A enjoyed life earlier and retirement is now going to be very tough, especially considering the lifestyle they have come accustomed to.

Person B is going to have a very enjoyable retirement without a care in the world (unlike person A who always had a job to come back to, person B can travel without a care in the world).

Person C has options. They can sell up, downsize and have 2.5mil in the bank to fund retirement. They can reverse mortgage their house to the government and request a sizeable payment to again enjoy retirement.

Person A is by far the worst off here which than comes to the point I know you are getting to which is why should the tax payer fund personA who chose not to save for their future? I think the important thing to note here is the pension is for from a reward! This person will no doubt be paying a high price for their lavish lifestyle and the result will likely (very high chance) of an earlier death.

I think if you surveyed 100 people on the pension and asked them if they could turn back time and either save properly for their future or live the lifestyle they did, would they want to do things differently?

 

So please tell me how a government can hope people do not rely on them for a pension when they are disincentivising people to buy their PPOR as you will pay your pension from it.

If I had a choice of paying 500,000 to then draw down in my pension time or blow 500,000 and get the pension at no cost, I can tell you which way I (and I'm sure 99% of people will go)...

Why do people work, to have a better lifestyle... Even with the current income tax if someone was to earn 200k they would have to pay 100k in tax (keeping it real simple) but they still get to take home 100k, which was better than not doing anything. However if you then decide to tax income at $1 in $1 the person on 200k will earn zero and then who will work for nothing if you can sit at home and collect the dole? So with working we reward people by paying them money and taking tax but we could 'survive' by using the dole. If the Dole was the same as what someone could earn through working, why would people work?

So if you give two people the same income (pension) but one has to pay for it (drawing against equity) and the other doesn't (as they got nothing) what incentive was there for the person paying a mortgage for 30 years?

If you don't reward the correct behavior you will get the wrong behavior. If there is no incentive and I was the person with the house I would go to the casino and put it all on red 4x (FYI if I win 4x my 500k would be 8M) and pray I get a win fall because if I lose (esp on first round) I don't actually lose only the government does as now they don't get to draw against my PPOR. As now I need the pension to 'survive' and have no assets for you to draw against.

 

I agree at 3M they can self sustain their retirement but it is unlikely Person C would own a 3M property without any other assets.

What if Person C house is only worth 500k (you know the typical M&D battler)? They cannot self sustain their retirement but we are talking about them drawing down the PPOR to fund the pension in reverse mortgage, how would we encourage people to look after their future if you may as well not own a house because you are in theory prepaying your pension, where as other just get it for free.

 

You've changed the original argument to suit your pensions are rewards for hard work idea.

The original argument was that asset rich should pay their way, not the average battler who struggled to put a roof over their head. The whole idea would be that property above a certain threshold would be included in the means test for the aged pension, the same as all other assets are.

So someone with a 500k house wouldn't fit in unless you set the threshold at below median house prices, which seems unreasonable. The idea is that the people sitting on the ~1.5m+ house would no longer be claiming the pension. This is completely reasonable because they're just as wealthy as someone with 1.5m in shares or cash who would be expected to pay their own way because they're capable of doing it and it's the right thing to do.

There is plenty of incentive to not be on the pension, it's a pittance and a miserable survival rate of income, if people aren't incentivised to not be on it by that then nothing will change that mentality that leads to being on it, this doesn't change that we have millionaires claiming welfare through a legal loophole.

Really to do a fair comparison you have 2 people...

Person 1 has a $10m main residence.

Person 2 has a $10m share portfolio.

Person 1 gets the aged pension, person 2 doesn't. They both worked equally hard and are both equally well off but one person is a welfare recipient costing taxpayers valuable money and the other isn't simply because of where the wealth was parked.

Heck you can change person 2 to have a $10m property porfolio and no main residence even and same difference.

The aged pension is the biggest expense to the government, an expense that is growing rapidly. It's pure welfare and we as a country should be doing everything possible to avoid paying welfare to anyone but the very most needy because we can't afford it, we're broke.