Pensioners will live to 90 - the sky is falling in

The SPIN by the govt that Pensioners are living longer and that will cause an "explosion" in Age Pension is as old as the Pyramids.  But in recent times it was done by Costello in 2005 and Hockey in 2015.

Here is Costello TRUTH

Here is Hockey TRUTH

If you look closely at age 65 you will see there IS a minute difference, but NO the sky is NOT falling in - that is simply lies and spin, spin and lies BUT most Australians believe it.

These figures are not something plucked from a Google search but the ACTUAL figures used in the Social Security Legislation.  For obvious reasons that use was REPEALED on 1 Jan 2015 but is still used by 97.47% of Pensioners.

So these graphs show we ARE orderly in the way we die, but if you want to see TOTAL MISmanagement please feast your eyes on the CPI graph since 1970.

Now THAT is incompetence, and by both Tweedle Dee and Tweedle Dum - makes no difference folks who you back.

Grandfathering Explained

There have been quite a few people who have tuned in to THIS thread at Whirlpool Forums and in a way THAT starts to prove Murray wrong, ie even though 84% of people are not confident in Retirement matters, at least they are TRYING.

So while I created a "fishing trip" to prove to myself that the Abbott govt would jump in with the same damage control methods as Abbott's mentor Howard, there are obviously some people out there that genuinely want to follow the issues here but are not able to interpret the graphs I supplied at my blog.

Of course as soon as it looked like some people were understanding what the govt DID with Grandfathering the thread was LOCKED, so for those that simply want to understand the numbers, please read on.

So I (we) will explain in words and numbers via a typical example, and I welcome any constructive input from those that "were sent" to ridicule me.  However let me explain that when I say I have done an analysis over 20 years, it is actually 21 as it goes from 65 to 85 inclusive, and by coincidence that is the exact same female life expectancy figure used by the Govt in the scenario we call "Grandfathered".

We use a single female (we call Agnes) with $400,000 in Super at 65 to align with the Murray Report example.  We add another $25,000 for car and contents and use a conservative 8% growth rate as well as a 3% "CPI Increase" as normally recommended "to keep up with inflation".

We then do two scenarios

Scenario 1.  Agnes applies for an Age Pension in Dec 2014

Scenario 2.  Agnes applies for an Age Pension in Jan 2015

Then we assume she gets advice from a financial planner (George) who is totally competent and can work with complex mathematics, AND is NON aligned to the Super Fund Agnes uses.

I will then start from the end result and work back to explain the result.

The result is Agnes loses $127,026 if she comes under Scenario 1.

The maths starts by explaining that the formula used in Scenario 1 takes the $400,000 Super, converted to an Account Based Pension and divides it by the Life Expectancy of Agnes which is 21.62, giving her an Income Test Free Amount (ITFA) of $18,501 pa.  In my submission this equation can have no other purpose by the govt than to spread the Super evenly over Agnes's expected life.

So Agnes asks George (in Dec 2014) to tell her just how much she needs to Drawdown in order to do that exact same thing, ie use up her Super in 20 years.  George tells her it is $31,624, escalating at 3% pa for her nominated CPI Increase.

He then explains that because her Drawdown is some $13,000 above the ITFA the Maximum Age Pension of $21,988 pa is reduced to $17,514, but he further explains that her Assets eclipse that and reduce the Age Pension to $13,263 which gives Agnes 60.3% of the Maximum Age Pension for Year #1.

George then explains that if she waits till Jan 2015 for her application the Asset Test will be the same $13,988.  He then explains that the Income Test will be totally different as the life expectancy formula will be replaced by Deeming, and that in any case the result of $17,435 is still well short of the Asset Test, "so no difference Agnes, apply when you like".

But as good as George is in his job he still only looks at one year at a time, so is unaware of how the maths works out as the years go by.  But we have the LOPS, a Cloud App that looks at the WHOLE picture and identifies the $127,026 loss to Agnes if she applies before 1 Jan 2015 (which she did).

Let's look at just one example to show why this happens ie at age 80.  The capital amount has reduced now to $217,219 so the Asset Test says $20,412 pa, ie about 93% of the Maximum Age Pension.  However the Drawdown is $49,269 pa so is more than double the ITFA, and the result is the Age Pension amount is just $8,691, ie less than 40% of the Maximum Age Pension.

The overall result over the 20 years is 49.63% of the Maximum.

If we then look at age 80 for Scenario 2, the Asset Test is of course the same at $20,412 BUT the Income Test is now at $20,633, almost the same, so Agnes is getting 93% at age 80 instead of 39%.

The 20 year result is now 77.15% of the Maximum Age Pension, ie $127,026 MORE over the 20 years.

This post does not attempt to determine if this is a deception or merely a mistake by those that drafted the Scenario 1 legislation.  The facts are that that legislation was REPEALED and there can surely be little argument about that, even though the Explanatory Memorandum did not EXPLAIN why as it is meant to do.

But the decision to allow the repealed legislation to "linger" via what is termed "Grandfathering" raises the most extreme questioning of the government's motives, and the fiddling with the Acts Interpretation Act (1901), the "Sister Act" to The Constitution, at the same time simply makes matters worse in my submission.

So, as I have already asked the government, please (anyone) show me that there are faults (of significance) in my maths above or show me an example where Grandfathering is beneficial to the Pensioner.  So far there has just been deadly silence.

That silence also extends to my estimate of the overall damage to the government of $10 Billion pa which I calculated on the conservative side.

But deception or mistake aside, the Sword of Damocles hanging over the government is that the $10 Billion pa can be restored to the Pensioners simply by knowing the facts and voting with their feet to "Throw Grandfather Overboard" to use the popular expression.  That is to say there is no need to mount an expensive Mabo type High Court challenge, as the solution is "built in" to the legislation simply by the Pensioner electing to "sweep" their existing Account Based Pension and starting a new one, free from Grandfathering.

Maybe it is the Georges of the system that need to explain this to their clients, now that they know the problem.

EDIT  It would be recalcitrant of me not to also do the maths for Robin as a Male, by changing Gender to M, we see that a Male would get an extra $106,550 over 20 years by switching to Non-Grandfathered, ie Grandfathering deprives a Female of $20,526 MORE than a Male, simply because the Sisterhood lives longer than the Brotherhood.

So once again it is easy to see WHY the govt was forced to REPEAL that formula, ie based on gender equity alone, and I don't think anyone could have any qualms about that 45 years after we were required to embrace Gender Equality.  The only issue is why allow repealed legislation to "linger"?

Smart Retirement - Take 3

Well this option is hardly what you would call smart but I am just informed at a Forum that it is a favourite of "certain" Financial Planners, who have done a Cloud Atlas type deal with the kids to do a "dash for the cash".

The option is for the Pensioner to DrawDown ZERO and just let Super accumulate (ie not take out an ABP that insists on a Min DrawDown).

So after 20 years there is well over $1 million in Super to be divided up between Financial Planner and kids, but the trouble is that the Age Pension is reduced to just 26.43% of the Full amount over 20 years, AND it is all up front ie reducing to half at age 70 and cutting out totally at 75 (ie no income and no health care).

The Pensioner would have an average of about $6,000 pa on which to "live" so would need to do without things like heating and food, so really this "eugenics" or culling is right up the alley of Tony Abbott's Final Solution as Health Minister to this Age Pension problem in 2005 (see below).  So he would probably die off at about 72 with about $400,000 loot to divide up.

It's NOT a plan we would suggest to a Pensioner but those are the maths involved.

TONY ABBOTT: "If you are to see on the front page of the newspaper headlines such as: "50,000 dead", or "50,000 to die", obviously people are going to start thinking the worst. On the other hand, if you work out that that translates to something like a one in 500 risk of succumbing to a flu pandemic, I think you are able to put it into a different kind of perspective."

Smart Retirement - Take 2

OK the post above is a lot to take in so I will start a new post here because I am about to once again explain the Big Grandfather Deception by the govt.

So far we have used the LOPS to show how a Retirement Income of DOUBLE the Age Pension is easily obtainable simply by having accumulated the Employer Contribution since 1990, and we mentioned that this Age Pension Application got snuck in just before Grandfathering came to be on 1 Jan 2015.

So given that the entirety of BigSuper called DOOM & GLOOM on those that came AFTER Grandfather, or those who were Grandfathered but had the temerity to do an Oliver and "ask for more", I am sure you will be saying I am not at retirement age so will I miss all this - boo-hoo?

Well the news is good as we pulled a little trick there and based the above result on NON Grandfather, so here is the sad news for those that bought the hype that "Grandfather is GOOD, STAY with Grandfather".

So for Robin as a bloke, under Grandfathered Rules he would get $57,518 LESS in Age Pension over 20 years.

As if that is not bad enough, for Robin as a gal she would get $75,671 less, so you will be saying OMG OMG how is it possible Germain Greer missed this INEQUITY for 45 years after the small f feminist takeover of 1970?  Simple answer is Germaine and the sisterhood don't use spreadsheets so did not KNOW.

And then none of the "One Year Wonder" Financial Planners do either, or at least if they do, they don't look at 20 years.  So that leaves just the govt and myself that understand the horrible truth.  So one can understand it HAD to be repealed, but NOT accept that it be allowed to linger for another 20 years.

The reason the Grandfathered Test regime (now REPEALED but allowed to linger) has a real Sting in the Tail that jumps in at 75 years or so, works this way.

When you took out an Allocated Pension (changed to Account Based Pension) you were given an Income Test Free Amount which was your total account amount (minus any Lump Sums) divided by your longevity as determined by ABS.  On the surface that looked fair as you were essentially getting about 5% FREE, SO if you DrewDown the Minimum of 5% ALL of your income was Test Free.

BUT as you get older the Minimum Percentage goes up, ie to 9% at age 85, but the Test Free amount stays the same. So by 85 4% is NOT Income Test Free but is FULL INCOME under Income Test, so DOWN comes the Age Pension.

The bottom line is this is costing the Pensioners that can be INDUCED by SPIN to stay "Grandfathered" about $10 billion pa, or to put it the other way if ALL those existing Pensioners "swept" their ABPs and took out a new deal, then the govt would LOSE $10 billion pa for about 20 more years.  That is 25% of the present total Age Pension budget and enough to BREAK the budget if that Sword of Damocles comes SPINNING down (pun intended) on the feast.

Smart Retirement

There is of course a cutoff point for Super Amount that will also allow you to get a FULL Age Pension, so this post examines how that might be achieved using the case of a person (and we will look at difference between male/female) of 40 years in 1990.

First task is to see how Keating's Compulsory Employer Contribution could fund such Retirement, so we draw up a spreadsheet that starts with a $40,000 salary in 1990 and escalates it at 3% pa.

Then we use an average of 5% Employer Contribution, and finally apply an 8% Growth Rate year by year, extending into the Retirement stage.

So for that person (male/female Robin) we get about $225,000 in late 2014 (so as to sneak in before Grandfathering ended on 1 Jan 2015).  As you see all the figures were conservative so the total might be more like $300,000, but $225,000 is enough, to start to eat into the Age Pension especially as we give Robin $25,000 in other assets eg a car etc, and say he/she is a homeowner.

So that gets rid of the "Accumulation Stage" and we are at Square One of off to see Centrelink and to see what sort of "LIFESTYLE OPTIONS" one has with this small amount of Super BUT all of it from Robin's employer.

Now read on:

Unfortunately (as Murray Report tells us) "94% of Retirees convert their Super into an Account Based Pension, and the majority use the Minimum DrawDown".  So that is what we will do for Robin.

Alas, even at our conservative Growth figure of 8% pa the Capital of the ABP continues to grow and even as the legislated Minimum Drawdown starts to increase over the years, at the end of 20 years the balance is 150%, and remember that Robin started at a point of getting over 90% of the Maximun Age Pension in Year #1, but over 20 years that slips to 79.32%, a total loss of $95,894 over 20 years.

The news is worse with the 2015 Budget changes to Asset Testing and the loss then escalates to $136,584.

So not only is that a huge loss of income but remember it was CAUSED by taking the Minimum DrawDown, so we have the double whammy effect as shown by the Combined Income Stream.

So the Total Income Stream starts at about $31,000 pa in Year #1 and barely makes $38,000 by age 85, just 49% more than for the Full Age Pension alone, BUT this IS what the majority of people do.  The Total over 20 years is $688,768

So let's leave that dumbness behind and get smart.  We ask the LOPS to tell us how much DrawDown to totally exhaust the ABP in 20 years (ie 2 years past Robin's Use-By-Date as a bloke) and it tells us that $22,868 pa is that amount.

We put that amount into the LOPS and all changes for Robin in 2015 (we will look at Grandfather in a moment).  He now gets 97.57% of the Full Age Pension, averaged over 20 years.  That is just $11,339 short of 100% Full Pension for 20 years.

You say yes, but what of the effect of the Hockey amendments 2017?  Well, it is just $91 over 20 years BECAUSE this plan is depleting the capital AWAY from the Hockey jaws.

And for Total Income Stream this profile is looking way better:

We start at about $42,875 pa (equivalent to a taxable income of $50,968) and end up with a steady INCREASE at about $45,000 at 85.  The Total Income is now $930,733 over 20 years, a whopping $242,000 better than the "plan" (NOT) of the self named "financial adviser".

Robin's Total Income Stream over 20 years is now slightly over DOUBLE the Maximum Age pension rate, and all he needed to do was BE in the workforce from 1990 to 2015.  He didn't need to put a cent into Super.  All of that thanks to the long term vision of Paul Keating which should eventually see the end of the Age Pension as a govt concern.

In conclusion, IF you see yourself being able to live in the "lifestyle" you want on a Retirement Income of DOUBLE the Age Pension, then this article says you can do that purely by working 25 years with your employer's Super Contribution ONLY.

Or if you want a better lifestyle you can start to add your own Super to this scenario, but of course the Age Pension will decline, and if you want to know just how much please contact us for an assessment report.

Here are the graphs in more detail for the second Scenario above.

The Three Card Trick - Grandfather, Murray and Hockey

Amid the normal doom and gloom media hype that "we are living too long" the government's plan to REDUCE the Age Pension Bill now becomes perfectly clear.

On 1 Jan 2015 Grandfathering struck the First blow, threatening Pensioners all that doom and gloom if they deserted him, saving some $10 billion pa if the pensioners BELIEVED the hype.

Then the Murray Report did the normal "blame it on the Pensioners" as the Second blow, explaining that 84% of Australians don't give a toss about Retirement Planning, and leave it to "financial advisors" and Super Fund trustees (who Murray described as somewhat lacking).

Then in May 2015 Hockey announced the Third blow via a new "retraction regime" for Asset Testing, said to save less than a billion pa but in fact saving about $5 billion pa.

To explain how smoothly this worked we simply need to update my recent post.  In this recent post I examined the example case provided in the Murray Report, and you can read it here.

The bottom line says Justin has been convinced during his working life that he needs $400,000 in Super as a bare minimum at 65, but AT 65 that he not USE it for his own benefit but simply Drawdown the MINIMUM amount.  A new idea of the CIPR is touted but that is purely pie-in-the-sky nonsense to cover-up the above seting-up of Justin to rob him of Age Pension.

Our analysis using a SENSIBLE Drawdown gave him DOUBLE the income over 20 years, including $206,000 increase in Age Pension, plus about $40,000 decrease in Fund Fees

Also our information that Justin would be $72,163 WORSE off if he took notice of Big Super to stay with Grandfather allowed him to avoid that trap.

So 5 months down the line since the Grandfather tricks, Hockey has announced the 2017 changes to Asset Testing, so we have factored all of that into the LOPS and can give you an update on Justin.

Had he stayed with the Govt inducement to NOT use his hard earned super, his Age Pension would go from $163,337 over 20 years, down to $32,187, ie a DECREASE of some $130,000.

But if he followed our advice to enjoy retirement he would go from $369,236 to $322,843, a lesser decrease of some $46,000, so he would be some $290,000 better off than had he meekly listened to his "Financial Adviser".

Here is the comparison shown graphically:

The top image shows the effect of being convinced by BigSuper that "you are SAFE with Grandfathering" but alas "the sting is in the tail" and we see the Green Income Triangles eat into the Age Pension to give just 63.12% of the Maximum over 20 years.

The middle image shows that by ESCAPING Grandfathering Justin gets 79.96% of the Maximum.

But that is short lived and from 2017 the Budget 2015 New Rules say even with escaping Grandpa Justin now has the Age Pension reduced to 69.92%, which is not quite as bad as for Grandfathering at 63.12%.

So finally the Double-Whammy is BOTH Grandfather and 2017 New Rules and here is the image.

The Age Pension is now reduced to just 55.69%, some $122,000 reduction.

Notice how skillfully the Govt has combined the New Rules with Grandfather, ie New Rules hit up front from 65 to 75 while Grandfather comes in from 75 to 85.  So remember you can't avoid the New Rules but Grandfather is optional.

Well in fact you CAN avoid the New Rules to some extent if you go easy on accumulating Super during your working life (maybe just take the employer contribution?) and so the Govt is covering that in conjunction with BigSuper, especially SunSuper with extensive advertising and the Pronking of "The R Word".

Budget 2015 Update

The budget of May 2015 has included some substantial changes to the Asset Testing for Age Pensions, to commence in 2017.

We have therefore updated our LOPS to allow us to give you a very accurate figure on just what the changes might mean to you over 20 years, and for the first case off the ranks today the news was a $105,000 DECREASE in Age Pension.

So to get a Report on your own case simply fill in the Form

De-coding Murray Report Example

As we mention the Murray Report is of course "coded" in order to fulfill its role of creating the illusion of activity and concern by the Govt but at the same time not actually CONCLUDING anything that could come back to bite them at election time.

So the closest the Report gets to an example to explain the "Weasel Words" [as Don Watson calls them] is this graph which shows how 3 different CIPRs [please read the Report if you really want to know what this particular Weasel Word might mean] might work by comparison to the strategy used by "most Pensioners" [on the advice of BigSuper] to simply use the Minimum Drawdown of an Account Based Pension [formerly Allocated Pension].

The first thing to note is the Freudian Slip via "excludes Age Pension".  That comment simply reiterates the message that the Terms of Reference of the Report excludes any reference in the Report to Age Pension [which of course makes the whole Report worthless].  So what this meant to say was "the income streams shown do not include any Age Pension to which the Pensioner may also be entitled to".

The SLIP is that the [unspoken] truth is that the Govt WANTS to exclude Pensioners from the Age Pension once they reach the 85 year mark in the graph above, but unless they change the legislation [by another "grandfather trick"?] the Pensioner would get the $25,000 pa shown above as well as about $22,000 pa in Age Pension.  So it is very convenient for Mr Murray that he does not need to inform us of this fact.

To very briefly explain the strategy being touted above, Justin [as we shall call him] has $400,000 in Super at age 65 and the Govt wants him to put aside $100,000 or so of that into an "insurance fund" in case he lives past 85.  Then he fully exhausts the remaining $300,000 by age 85, hence the income stream lines above simply continue on at the same "smooth" level to age 100.

Of course the Report tells us nothing of Justin's details except he is a male of 65 and has $400,000 in Super, so we will assume some facts [eg Justin is a homeowner and his Fund returns 8% pa].  We then do two examples, one similar to the "dotted line" one above for Min Drawdown and one exhausting his Super at age 85 [ALL of it, ie no insurance policy].

But here we differ dramatically from the Murray Report method [same as BigSuper] in that our LOPS shows EVERYTHING, including Age Pension, and if you avail yourself of our service, our Report to you will be based on your EXACT circumstances.

LOPS is of course a satirical jab at the Govt propensity for acronyms in their Weasel Words [eg the latest one of CIPRs] and simply stands for Little Ozzie Pensioner System [ie for the Little Ozzie Battler, that classic Australian entity].

In the top figure Justin is taking the advice of his BigSuper adviser and Drawing down the minimum amount and as you can see is living frugally on just $20,000 pa to start, the very time when his health still allows him to do the Grey Nomad tour around Australia, but alas he is short on funds.  If he lives to 95 he will be getting $70,000 but that will be of no use in a nursing home.

In the lower figure Justin takes Our Advice [using the LOPS at ozpensions.info] and will get DOUBLE that at $40,653 [the amount the LOPS calculated to exhaust his Super at age 85], so he can now afford to take as many trips as he wants till the wheels fall off his caravan or himself.

And because the Fund Fees are based on the account balance, he saves $37,017 on fees over the 20 years.

But you are already thinking that his large Drawdown of $40,000 pa must surely reduce his Age Pension and prior to 1 Jan 2015 you might be right, but Justin comes AFTER the evil curse of Grandfathering.

A comparison of the two "C. Testing for Aged Pension" figures above shows that it is Justin's Assets [ie NOT his deemed income] that determines his level of Age Pension and simply by gradually EXHAUSTING the capital he goes from 35.37% to 80.14% over 20 years, an increase of $206,657.

Then if we compare the two "D. Combined Income Stream" graphs we see Justin has gone from a 20 year income with an average of about $40,000 pa to one of about $60,000 pa, a total increase of $413,755.  His Year #1 income is a tax free $53,134 and the LOPS tells Justin that that is equivalent to a taxable income of $63,193.

But you say that IF he lives past 85 he will be back to just the Age Pension.  That is so but if you refer back to the brand new "solution" by the Govt at the top of the page, that was ALL he was going to get past 85 ["excluding" any Age Pension, however you may wish to interpret that Freudian Slip].

Finally it would be "intellectually dishonest" not to look at the Grandfathering situation, so here it is:

The result is that Justin would be worse off by $72,163 over 20 years if he had started his retirement prior to 1 Jan 2015 and remained convinced by BigSuper that he should REMAIN with Grandfather Rules [rather than sweep his product for a new one].

So we see yet another example to demonstrate just WHY the "Grandfather Amendments" were introduced in such a clandestine manner, and then "spun" by BigSuper as "Grandfather is GOOD, New Rule is BAD".

Ongoing Personal Security Update

It is some 10 weeks since I tabled my Ministerial with Canberra about the Grandfather Fraud and things are happening, though "unofficially".

Obviously the Abbott Goons do not have the sway with Google they may have expected to delete my posts, so I will continue to use Blogger to secure my safety.

The first "strange happening" was that I had a new customer who was a little old lady who was being screwed by Big Super and was much in need of help.

Our Report to her "went astray" and then the little old lady herself "went astray".  Now given her stated state of "very tired" having to keep working at 67, it may be possible she is in hospital or died, BUT when that is coupled with an Australia Post item neither reaching its target in 2 weeks or being returned to sender, we are looking at a serious situation.

The second "strange happening", right on top of the Abbott announcement of using the excuse of "kiddie porn" to cause our ISP to "rat on us", I GOT one of these attempts to "do a Rolf Harris" on me.

The person who contacted me "out of the blue" was Randy, a "damaged by Family Court" man who fled America to live in the Philippines in 2001.  I was presented with a purported "travel site" [which the Abbott Goons know is of interest to me] but it simply loaded a swag of what the Goons call "kiddie porn" onto my computer.

Here is the site and you can see that Randy is very fond of young Filipino kids, but that does not make him a pedophile in a "normal society" like the Philippines where Randy is doing one hell of a lot of good for these poor folk from his meager Pension.

But as we know, in an Australian or American trumped up "court situation", simply having these photos on your computer is enough to have you put away for life.

SO I deleted all reference to Randy from my computer, meaning I now await the next attack by the Abbott Goons.

Dear Google, How much Super do I need?

To confirm the self seeking belligerence of BigSuper as we saw in Mary's Case, we Googled that question and the top entry was for a well known Telco Fund [name withheld for privacy reasons].

As expected the website was advising that a single retiree at 65 [Let's call him Terry of Tel----] needed an income of $50,000 pa to live "comfortably" and that that equated to capital of $700,000 in his Super Fund by 65.  They boast of an historical investment rate of 9.89% but we have cut that back to 8% to be conservative.

Firstly they of course mention the "impossibility" of living on the Age Pension

"The Age Pension is currently set at 29.4% of Average Weekly Earnings for a male (a maximum of around $427 a week for singles and $644 a week for a couple)."

What they don't say is Terry will have no mortgage/rent, tax, cost of raising kids or "employment costs", and may find $427 to be quite adequate for his retirement lifestyle.  Terry simply likes fishing and not taking 2 boring Rhine River Cruises per year [and risking being attacked by a ''gay divorcee lady'' after his hard earned money].

Now as you can see Terry is told to Drawdown $50,000 pa which is a bit more than the Minimum Drawdown of $35,000 pa, but not much.  At the conservative 8% Growth Rate figure, if he died at 85 [2 years past his Life Expectancy] he would still have about $800,000 left - ie more than he retired on.

So the Fund has him retiring on $960 pw, which just happens to be [only] double the Age Pension rate, ie the rate had he kept the whole $700,000 [not paid any Super] and put it into his home [which of course does not enter into the Centrelink calculations].  The big loser would be BigSuper as just for the years 65 to 85 their fee would be about $115,000, but that's not Terry's worry.

But if Terry came to us, having already retired with $700,000 Super we would suggest he actually USES it and would tell him that an income of $71,134 pa [$1,367 per week - more than THREE times the Age Pension] would exhaust his funds in 20 years.  Alas the Fund fees would drop by $47,000 but as for Mary, that is not Terry's problem.  Terry can now take 4 boring Rhine Cruises a year, but he really just wants to go fishing.

Of course the advisors have looked Terry straight in the eye and explained they are doing this in ''his own best interests'', citing ''market uncertainty'' as the bogey man.

So let's backtrack to see WHY Terry sacrificed ''leisure etc'' during his life to accumulate this huge $700,000 of Super.  The website starts by throwing up numbers as to why Terry will need this amount and if we just consider ''leisure, clothes, transport'' they are saying he needs $450,000 over 20 years to ''get by''.

The great irony is that young people of today are being convinced they can not afford to take that backpacking "Grand European Experience" that was simply part of  vital ''life experience'' in the 1960s and 1970s because they need to put the money into Super.  But then when they are old and perhaps in a wheelchair with no advantage to be gained from that Rhine Cruise, they are being told they must do it as they mortgaged their lives away to HAVE it.  And the Funds rub their hands in glee as another sucker takes the bait.

The bottom line is there is a happy medium somewhere between the Fund plan for Terry and simply the Age Pension, and as for last 30 years or so with compulsory employer contributions it is impossible to have no Super at all unless you lose the shirt off your back in the lousy Family Court.  So let's assume by paying nothing himself Terry ended up with the same $200,000 as in Mary's case [but now with 8% investment rate].  It is not important if he or the company paid the $200,000, but simply that it is $500,000 LESS than the Fund Plan.

We now use the LOPS once more to find that if Terry Draws Down $20,327 pa he will exhaust his capital in 20 years.  Doesn't sound a lot until we find that for Age Pension he goes from a big fat ZERO for the Fund Plan to $428,591 over 20 years, a massive 92.82% of the Maximum Age Pension.

So his total Income Stream is now $803 per week, which is 84% of what the Fund said he needed, or exactly one less boring Rhine Cruise a year [which Terry didn't want anyway].  But as for fishing, the extra $500,000 invested into his home would not only have given him a luxury swimming pool but a fully stocked barramundi pool as well.

And as you guessed, the fees to his Fund over 20 years are reduced by $86,846.

Terry may of course have ethical/ego reasons as to why he would not want to "resort to accepting money from the government", but in all our time helping retirees we have never found a person with such ideas, but rather the opposite in millionaires, indignant they are not "recouping their hard earned tax dollars".

So the message to those younger folk is simply plan YOUR retirement on YOUR needs and not those trumped up by greedy BigSuper.  You will probably find that the employer contribution is quite adequate.  Simply do the sums yourself.

Why we have TOO MUCH Super

We are hounded by BigSuper from the day we start work to sacrifice all manner of things [eg leisure] to build up a huge "nest egg" of Super for our retirement.

Then when we do retire we are scared out of our pants by BigSuper to not USE it but Drawdown the Minimum Amount to keep accumulating our asset, so we live "frugally" [as the Murray Report assesses] and die with more Super than we retired with.

In this instance I use the term BigSuper as including the major "stakeholder" of the Government itself, because as we will see the Super Industry and the Government work hand in hand to make your life a misery, and I will explain the numbers via the case of Mary, the latest casualty seeking help from agepensionsolutions.com.

Mary is 67 and has been caught in a Negative Gearing trap by her "Financial Advisors" whereby because of falling property prices she is unable to sell her investment properties at a reasonable price [to not make a big loss] so she must keep working full time to keep the NG myth going hence is missing out fully on Age Pension.  She is tired and sick and is obviously headed for an early grave if she can't get out of this vicious cycle.

Her only option is to sell at "fire sale prices" and cut her losses, but she is worried if she can possibly live on what she has been told by her advisors to be "insufficient income for her twilight years", but is code for "we won't make enough out of you".

Mary was looking at retiring with $300,000 in Super but was told she needed more and the NG plan was expected to boost that to $450,000.  So we have done the sums for her to either come out even from the NG fiasco at $300,000 or sell at "super fire sale" prices and come out with just $200,000.  Here is the Report.

This is Report #3 and explores the difference between having $300,000 in                  
Super and having $200,000.  In both cases the Allocated Pension Drawdown                  
is calculated so as to fully exhaust the capital at 20 years, without any CPI                  
increase/decrease used.  Page 4 shows result for $200,000 with an annual Total                  
Income of $35,459 (for Year #1).  The total Age Pension over 20 years would                  
be $431,534.  Page 5 shows results for $300,000 with an annual Total Income                  
of $40,237 (for Year #1).  The total Age Pension over 20 years would be                  
$387,475. The "bottom line" is therefore that by doing a "fire sale" of your                  
investment properties and retiring on $100,000 less in Super, your weekly                  
income would drop from about $770 to about $680.  So there would be a $90                  
(9%) per week drop in your total income but factored into that is the fact you                  
GAIN $44,059 in Age Pension, meaning your overall "loss" of $100,000 in                  
Super starting capital by virtue of the fire sale option is in fact reduced to                  
$55,941, because of the GAIN in Age Pension.  To complete the picture we                  
can revisit the "pipe dream" plan you were sold based on negative gearing,                  
promising to give you an extra $150,000 but in fact being a financial disaster                  
and albatross aroung your neck preventing your retirement. If it had worked                  
your weekly income (using the normal Min Drawdown of "advisors") would                  
have been about $590, and you would have LOST $270,155 in Age Pension.                  
Our recommendations are therefore to "cut your losses" and retire, because                  
even $680 per week is most adequate for a retired person with no                  
mortgage/rent or "cost of employment" expenses. 

Now you will be asking why on $200,000 she would get $680 per week and on $450,000 she would only get $590 per week?  As already explained above and in the Murray Report, BigSuper scares Pensioners into taking just the Minimum Drawdown, so even using a very conservative 6% investment rate Mary would still have $418,500 left if she reached her "batting average" of 87 [but more likely about $600,000].

So that answers the Government portion of BigSuper reason, ie she gets $277,155 less in Age Pension.

But of course the Murray Report was a Politically Correct "wallpapering" document so was not allowed to mention that aspect OR the fees charged by BigSuper so we added a fee calculator to the LOPS.  Of course most of the fees are based on a "per $1,000" basis so the last thing a Fund wants is for the Pensioner to REDUCE the capital.

And to put dollars to that scenario, for the $200,000 case the fees for 20 years would be $27,155, but jumping to a massive $82,276 for the $450,000 case - case CLOSED at $55,121 extra for the Fund side of BigSuper and a total of $332,000 or so LOSS to Mary.

And not to mention that as Murray says, Mary may have lost her "cognitive skills" by then and not allocated her capital to anyone, meaning $600,000 goes into BigSuper "Never Never Land", never to be seen again.

Now read the next post to see how this rip-off works for a typical BigSuper Agent.