NSA WARNS OF A MAY BUDGET RAID
SPECIAL REPORT COMPILED BY JOHN McNAMEE
Seniors groups fear that the superannuation nest eggs of hundreds of thousands of Australians could fall foul of the Federal Government’s May Budget.
And more than half of Australians aged 45-plus with knowledge of superannuation believe that the rules change too often, according to a nationwide survey.
Almost 40 per cent of these people who are still working say changes to the system are affecting their retirement plans.
And of those already retired, 25 per cent say the uncertainty created by those changes is affecting their retirement.
The figures, buried in a wider National Seniors labour force survey published last December, come amid speculation that superannuation may become a victim in the upcoming May Budget.
National Seniors Association (NSA) chief executive, Michael O’Neill, says the findings are a warning to policy makers considering raiding superannuation to fund election promises.
“Superannuation is still young and its reputation ultimately rests on its ability to produce promised goods: the retirement incomes Australians have sacrificed and planned for.
“Governments can’t flip flop about and suddenly shift the goal posts as we near retirement,” said Mr O’Neill.
“Apart from undermining confidence in the system, it’s simply not fair.
“For example, the deferral of the $50,000 concessional contributions cap may have given the government an extra $1.5 billion to play with in 2012, but it left many older Australians unexpectedly short changed.
“It sends a message to younger generations that what they buy into today could, on a political whim, look vastly different 30 years down the track,” said O’Neill.
More than 3000 Australians aged 45 to 74 were interviewed for the National Seniors Productive Ageing Centre’s Barriers to Mature Age Labour Force Engagement in Australia report. It was prepared for the federal government’s Consultative Forum on Mature Age Participation.
The survey also showed:
* 94% of people who have worked in the past 20 years have contributed to their super.
* 81% of those yet to retire expect super to be their main income source in retirement.
* 47% have a fair amount or great deal of knowledge of the super rules.
* 52% of those who know something about super rules say they change too often .
* 39% of the non-retired say that this uncertainty is affecting their retirement plans.
* 25% of people who are retired say this lack of certainty is affecting their retirement .
And in another major survey, research has discovered that many older Australians are as embarrassed about talking to financial advisers as they are about visiting their doctors.
National Seniors Productive Ageing Centre’s report “The Role of Financial Literacy and Financial Adviser Anxiety in Older Australians’ Advice Seeking” investigated the role of seniors’ financial literacy and anxiety in their decisions about money.
The report’s authors, Paul Gerrans from the University of Western Australia, and Douglas A. Hershey of Oklahoma State University in the USA, found the embarrassment about revealing personal details to financial advisers was similar to the reluctance many people experience while disclosing their health problems to medical professionals.
An online survey conducted for the study showed that 46% of respondents reported “mild anxiety” about talking to a financial adviser, while in a quarter of cases, anxiety was rated “moderate” to “severe”.
Many were reluctant to reveal personal financial information on subjects such as poor previous investments, their credit card balance, changed employment circumstances and tax liabilities.
They worried their advisers would judge them negatively for their past decisions and were also put off by financial market jargon.
“Knowledge is power and older people need to feel confident in discussing their financial futures,” National Seniors’ Mr O’Neill said.
“Finance professionals should also take steps to gain the trust of their clients by explaining their options in layman’s language and addressing their concerns from the very first meeting.”
Nearly half the survey respondents – 47% – said they could only cover their expenses for less than six months without borrowing money or moving house if they suddenly lost their main source of income, a figure of particular concern when older job seekers aged over 55 are out of work for an average of 72 weeks.
The report said the disclosure reluctance had the effect of undermining the adviser’s ability to provide appropriate financial advice on matters such as changing super investment allocations and making salary sacrifice decisions.
And while financial products had become more sophisticated and complex over the last 20 years, investors’ knowledge of superannuation and retirement saving had not kept pace, particularly with older women over 69.
The report recommended governments, private sector employers and super funds conduct public education campaigns to ensure people were financially well-informed.
But it has also been revealed that the desire of older Australians to ‘age in place’ may be a far-fetched reality with new research revealing many Australian dwellings are unsuitable for ageing at home.
Two in three people aged over 50 intend to remain in their current home as they age, however 36% live in a home that does not have design features suitable for elderly people.
The most common changes needed to people’s homes were hand rails (65%), toilet/bath/laundry modifications (57%) and ramps (51%).
Around 29% of mature age people say they will not be able to afford the changes required to make their home more age-friendly.
Although ageing in the community is strongly preferred by mature age Australians, previous research indicates that about 28% of males and 46% of females will be admitted to residential care at some point after the age of 65.
“These findings suggest there is a significant disconnect between the stated desire of many Australians to age in their own home and their actual ability to do so,” Mr O’Neill said.
“Research in this field is vital. Enabling people to age at home will help offset the increasing aged care costs associated with population ageing.”
Although maintaining independence is a key priority for older Australians, only 38% of over–50s have taken steps to prepare themselves for frailty and getting older.
When considering higher care needs, just one in four respondents believed they could afford the costs of aged care; and 40% simply did not know whether they could afford aged care costs in the future.
Just under 80% of older Australians strongly support a co-contribution model for funding aged care in Australia – one that is means tested with a contribution on behalf of the person receiving care.
The findings were contained in the report Where Will I Live as I Age, a joint venture by the National Seniors Australia and Group Homes Australia.
Meanwhile, older Australians have described a much anticipated pension increase coming off the back of the first deeming rate cut in four years (March 2009) as welcome but long overdue.
According to a report from National Seniors, deeming rates are meant to reflect the standard returns pensioners can earn on their investments, and, therefore, are used to determine individual pension levels.
“Pensioners living off their investments have seen six official interest rate cuts since March 2010, and in that time the deeming rates haven’t fallen once,” Mr O’Neill said.
Research suggests a string of interest rate cuts have seen the returns on low risk savings accounts – favoured by retirees – slump 15 to 30 per cent.
“Retirees aren’t earning from their term deposits today what they were four years ago, and, unfortunately, the government has been extremely slow in acknowledging this.
“This little boost in the pension will come as welcome relief for many,” he said.
Historically, deeming rates have decreased almost simultaneously with falls in the cash rate, according to the NSA.
From March part-rate pensioners will see an average increase of $6.80 per fortnight in their pension payments.
The lower deeming rate will decrease from 3 per cent to 2.5 per cent for financial investments up to $45,400 for single pensioners or $75,600 for a couple.
The upper deeming rate will decrease from 4.5 per cent to 4 per cent for balances over these.
In another development, the NSA says it hopes changes to residential accommodation charges will help consumers better navigate the minefield of entering aged care.
The Government recently announced a raft of recommendations into how aged care accommodation is charged in Australia. The changes will require aged care providers to better justify their accommodation charges to consumers.
Under the changes to be introduced in July 2014, all providers will need to publish their charges, along with information about the quality of the accommodation so that consumers can compare and be more informed in their decision making.
Mr O’Neill said the requirement to publish this important information would help to better balance the respective market power of consumers and providers.
“Aged care is a minefield to navigate and what we see is many residents and their families facing real stress because they don’t have the knowledge and access to information to navigate this complex area,’’ Mr O’Neill said.
“Transparency is the key to good consumer decision making.
“The government has recognised that accommodation charges must be presented in a more transparent manner so that residents and their families better understand the information and are able to see the rationale behind the charges,’’ he said.
“It’s good that government has responded to the consumer voice but we need to continue to make sure consumer protection remains a priority.”