australianvoice (australianvoice) wrote,

A Quiet Word to Young Comrades about Pensions and Superannuation

A while ago I posted an article about the Greens/LNP changes to the age pension which passed last year. The changes will cut or remove the age pensions of 300,000 older Australians in January 2017. The changes are that “singles with savings and assets of more than $547,000 (excluding the family home) will lose the aged pension while couples with savings and assets of $823,000 will lose the pension.”

This post attracted the following comment:

“Does this sound like ALP / Greens voters to you?
Most of us should be so lucky...”

This apparently harmless comment is even worse than the legislation.


Suppose an older retired couple have $850,000 in assets. The Greens and the Murdoch media have been telling people that pensioners with assets at this value are “millionaires”. This is pure propaganda to justify their “austerity” agenda. Real millionaires like Malcolm Turnbull or Gina Rinehart do not have superannuation and in fact never really “retire” at all. People with $850,000 worth of assets may look “rich” to you because they have more money than you do, but they are really very small fish.

How do these “millionaire” retirees who will lose their pensions compare with the wealth of other Australians? According to the latest report from the Australian Bureau of Statistics “the average net worth for all Australian households was $809,900 in 2013–14.”(HI) This includes the value of their residence, which is excluded in the assessment of assets by Centrelink for pensioners. So their net worth is indeed better than average, but how wealthy are they?

If we look at the following chart we can see that they fall into what we can call the Upper Middle 20% of our population. Don't forget that there are roughly 4 million Australians, the people in the top 20%, who have more wealth and/or assets than our couple. Does this mean that, if you are a “lefty”, you want to take the age pension from everyone who has a higher income or more wealth than you do? This looks more like envy than a political doctrine or belief about the best way to run our society.

Top 1%...............$5,500,000
Highest 20%...........2,215,000
Upper Middle 20%........766,000
Middle 20%..............437,000
Lower Middle 20%........191,000
Lowest 20%...............31,000

There is another way to see that our couple are small fish. Let us compare them to the top 10 richest Australians given below. A simple calculation will tell you that the top 10 of the richest Australians have 77,647 times the wealth of our retired couple. Even the poorest of the top 10, Christopher Wallin, has 3294 times their wealth. If our couple have managed to acquire $850,000 and a house during a working life of 40 years or so, we can also assume that they have also paid a lot of tax during their working lives. Certainly they have paid more in taxes than Gina Rinehard and the other richest 10 Australians. The benefits of our tax dodges go mainly to the top 10%.

Top 10 richest Australians:
1 billion = 1,000,000,000

Gina Rinehart.......$22,000,000,000
Frank Lowy............6,800,000,000
James Packer..........6,000,000,000
Anthony Pratt.........5,900,000,000
Ivan Glasenberg.......5,600,000,000
Harry Triguboff.......4,900,000,000
Wing Mau Hui..........4,800,000,000
John Gandel...........3,700,000,000
Andrew Forrest........3,600,000,000
Christopher Wallin....2,800,000,000
Total Approximate....66,000,000,000

Abbott and Hockey cried “austerity” in 2014, insisting that the sky was going to fall down if government expenditure was not cut. Anyone on the “left” who thinks this is, or was, a real problem has fallen for LNP/Murdoch propaganda. There was no problem. There is no problem. As we see now, the government deficit has almost doubled under the LNP. Their real goal was to give $50 billion in tax cuts to large corporations and “pay” for it with savage cuts to unwanted “entitlements”.

The most obvious fact the “lefty” quoted above seems to have missed is this: If the government really is short of money, why not consider raising taxes? The real problem is that the tax system has more holes than Swiss cheese. It is the richest 10 Australians, the top 1% and the top 10% who use these to evade taxes. Take one simple example. Money put in special superannuation accounts is taxed at a lower rate (15%) than the marginal rate of income tax. Because of this $32 billion dollars of tax is evaded each year largely by people earning higher incomes. This is about the same amount of money it costs the government to pay ALL Australian age pensioners.

So why do the LNP and the Greens think it is “Balanced and Fair” to take a very small amount of pension from our older couple (very small fish) but do nothing about the tax evaded by people with much higher incomes? Any “lefty” who jumps at the idea of taking pensions off anybody needs to have a good hard look at what their political beliefs really are.


Joe Hockey famously declared “The Age of Entitlement is Over.” But what does that really mean? As a citizen of Australia you are entitled to free health care and lower cost medications. This is an “entitlement” and the LNP want to destroy all of these entitlements. They want to make you pay for all health care, tests, etc. and pay more for medication. They want you to pay $100,000 for a tertiary degree. If they manage to privatize Medicare, then a visit to the doctor, hospital or a university will be like a visit to the supermarket. First you pay, then you can walk out with what you want.

For decades in Australia the age pension has been one of our entitlements.
Whether you own your home or not, you can get an asset-tested pension. The amount of your pension goes down – called a part-pension – as the value of your assets goes up. The previous cutoff point for the age pension was $1,151,500 for home owner couples and $755,500 for home owner singles. This is probably where the “millionaire” tag came from.

In the 1950s a million pounds was indeed a great deal of money. However after decades of inflation a million dollars does not make you a millionaire. Even owning a million dollar house does not make you a millionaire. Australia's recent housing bubble has driven house prices in major cities way beyond their real value. That's what a financial “bubble” is. Even the ABC was conned into doing a report on an elderly widow in Sydney living in a house now worth $1,000,000 but getting a pension. How could this happen? A woman of her age (say in her 80s) probably did not work, and her husband – now dead – would not have had much super, if any. Thanks to the housing bubble her rather ordinary house is now worth a million dollars, but you can't eat bricks.

Only the austerity NAZIs like Hockey and Morrison think this is a problem. They have the ultimate plan of making people sell or reverse mortgage their house to pay for their own retirement. But remember, they don't see the age pension as an entitlement!. They see the age pension as a pittance they must pay to people who otherwise have no assets whatever. In the Depression people were told to sell expensive items – like their piano – before they could get the dole. The austerity NAZIs want to do the same. The “End of Entitlement” means the “Beginning of Paying for Everything Yourself”! The end of entitlement is like driving on a toll road. You can't drive on such a road for nothing because it is private property. Driving on public roads for nothing is an entitlement.

The “end of entitlements” really means the end of all government subsidies for anything: doctors visits, medication, operations in hospitals, all kinds of education, legal aid and anything else that goes to help ordinary people rather than super-rich overseas investors. The decision on the age pension is just the thin edge of the wedge. This process has been going on for some time, with cutbacks and asset sales. However the LNP led by Abbott and Turnbull is going full steam ahead. This is why I was so unhappy with the Greens' support for this measure. Do they not know what is going on, or do they not care?

A retired couple with $850,000 worth of assets will want to do two things. They will want a reliable income and they will want to pass some of their wealth to their children. So it is standard practice for retired people to put their money into a very safe form of investment like a term deposit with a bank. This will keep their capital intact and provide some interest which they can live off. However now such investments have only very small rates of return, about 3%. So how much interest will $850,000 earn today? At 3% it will earn $25,500 per year. And what is the poverty line in Australia? For a couple with the head of the household no working and owing their own home, the poverty line is $21,000. Just for comparison the maximum age pension for a couple is $34,100.

What the LNP and the Greens have said to our couple is that they should live from the interest from their capital plus use some of the capital itself for living expenses.
This means that over time their assets will decline and eventually they will get a part-pension once their assets fall below $823,000. However blind Freddy can see that in the future this cutoff point will go lower and lower to squeeze the savings out of middle Australia. Remember, the super-rich feel none of these cuts. The cuts will hit more and more ordinary Australians, particularly those who have managed to save a few crumbs over their lives. Virtuous “lefties” who have nothing think this is a lot of money, but when you compare it with Mr Wallin's $2,800,000,000, you can see that it is indeed crumbs. Even at 2% it would earn $56,000,000 per year!

You might say: So what if people with $850,000 in assets have to live off their capital when then retire? However there is a very large principle lurking in the background. Do you really think that the government will never change the asset test to a lower figure again? Of course they will. And what will be the consequence of such changes? Over time, what is called intergenerational wealth for people in this middle income range will decline. It will not decline for the top 10%. Their wealth clearly gets greater each year. So over time there will be a greater and greater gap in accumulated wealth between the top 10% and the rest of the Australian population.

This could become even worse if the government decided to include the value of your house in the asset test for the age pension. They are thinking about this right now. It would mean that pensioners would need to get a “reverse mortgage” from a bank in order to stay in their home. Of course the bloodsucking banks would love this, and there would be even less for these lower income age pensioners to leave to their children. Make no mistake. The LNP is out to bankrupt the “middle class”of well paid workers and small business people. If you think this is a good idea, how are you different from the LNP?


This statement might be translated as: Since these people have $850,000 in assets and a house then they must vote for the Liberals or Nationals and why should we (“lefties”) care about them? First, you don't seem to realize that a good number of Labor supporters, and even more Greens, would have this kind of money when when retire. After all, the Greens is a middle-class party. Second, if you comrades think your enemies in your class war are the people who vote for the Liberals or the Nationals you are picking a fight you cannot possibly win.

The people to fight are the people who support and fund these two parties. As I have explained, the LNP is out to widen the wealth gap between the top 10% of income earners and the rest of us. Everybody who is not in this 10%, doctors, teachers, small farmers, small business people, well-paid workers, older Australians on a pension, are getting hammered. The LNP is also driving down the wages of even the lowest paid workers and the unemployed. This is perhaps where younger comrades have concentrated their attention.

Nevertheless, if you actually want to achieve something in politics, you must understand something about the lives and fortunes of all people in Australia. Nothing will happen in Australia until most people who are not in the top 10% unite against the demands of the large Australian and foreign owned corporations who have gained immense power in the last 15 years. This has totally changed the political landscape of Australia. Particularly small businesses and small farmers have been completely abandoned by the LNP. They vote for the LNP because they always have, but the LNP in 2016 is not the same as the LNP in 1966. That older era of politics is gone forever, as the giant corporations have gained almost complete control of the political process. These are new times, and we need new politics to combat the new enemy.


The super-rich who now control the free world thorough giant banks, multinationals and hedge funds do not need superannuation. With such huge investments, they have more than enough money to last for 100 lives. These people would have no conception of “retirement”.

Superannuation, when it is not simply a tax dodge, is for people whose income from whatever “work” they do will end when they quit work or retire. There was a time when only men with highly paid jobs had superannuation. Most working people got a “lump-sum” when they retired from a job where they had been working there for some time. They then lived off the age pension and used the lump sum to pay off their house, take holidays or just keep it in the bank for some emergency.

At the time many saw Keating's superannuation system as a good idea, but few understood the basic idea behind it. Until that time the age pension was an “entitlement” adequate for most and funded from taxation revenue. The idea behind Keating's scheme was totally different. The goal of Keating's plan was to replace the tax funded age pension with a personal superannuation account based on the earnings of that person. In some ways Keating was ahead of his time, because in effect he wanted to “privatize” the age-pension. Your pension was not going to be funded by general tax revenue, but by the earnings of the money you deposited in the free market investments called superannuation.

Of course the Keating plan would take decades to work. It would take time for the deposits workers put into their accounts to increase to a sum which could be used to live on. And remember, the usual way that retirees see superannuation working is this: A superannuation account is a sum of money which can generate enough interest to live on. For some time after the system was established interest rates were high, some around 9%. Of course inflation will erode the value of a lump sum over time, so a wise investor would leave some of the interest earned in the fund to keep the balance at the same real value. So if you had $500,000 in super, you could live on $40,000 and keep $5,000 of your yearly interest of $45,000 in the account.

Keating's system has not really had time to work, as there has not been enough time for many people to accumulate the amount needed to generate an income to live off. But now with the “austerity” crisis, when governments must cut taxes to increase the earnings of the super-rich, the LNP wants to quickly change the older “entitlement” pension system to the new “safety net” pension which will only be paid to people who have no assets at all. Because “austerity” is a scam to increase the wealth of the super-rich, any “lefty “ who thinks cutting anyone's pension is a good idea needs to ask themselves which side they are on. Are you with the super-rich or with the rest of us? 90% of Australians are being pushed into 19th century poverty: low wages, long hours, low levels of home ownership, no public health care, no public housing. Dickens, here we come!


HI: 6523.0 - Household Income and Wealth, Australia, 2013-14
Tags: archive, australian politics

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