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.
Thursday, February 19, 2015
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.
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.
Thursday, December 11, 2014
Grandfather Outpaces the Murray Report
The fact that this particular "Grandfathering" [for Account Based Pensions] has been rushed through Parliament on the very eve of publication of the Murray Report should have the alarm bells sounding at 140 db.
The Murray Report has several Grandfathering Recommendations for such as Negative Gearing, and all will be considered by the Govt in the fullness of time, so why was this singular provision not just put into the mix of the Report?
The simple answer is the Govt did not WANT any official comment on the REASON for the REPEAL, and let's be totally clear that the Amendment was not to "add" any new provisions but to repeal [over 20 years or so] the existing statutes that treat Income Testing of Account Based Pensions differently to all other Assets.
So repeal of those statutes simply removes the "special treatment" and the Testing reverts to the same as for any other "non-Centrelink" [eg car etc] assets. Nothing has been added.
So while the Report must therefore consider that matter "done and dusted", it does still refer to certain "symptoms" OF the issue, but without pointing too straight a finger.
"Information from stakeholders suggests that many retirees find it challenging to navigate the transition to the retirement phase of superannuation. When DC members notify their superannuation fund of their retirement, many funds recommend they speak to an affiliated financial adviser. Research has demonstrated that the quality of this advice can vary significantly. Anecdotal evidence suggests that some advisers have limited knowledge of longevity risk and how it can be managed. Although the Inquiry makes recommendations to improve the quality of advice, it will take time for such improvements to occur."
The Report goes on to say:
In any case, many people do not seek professional advice, and funds and advisers overwhelmingly recommend account-based pensions. Stakeholders advise that, for less financially literate individuals, the simplest option is to take the entire benefit as a lump sum because other options can be difficult to understand and may require completing complicated forms. A recent survey commissioned by AustralianSuper found that “… 85% of pre-retirees are not confident in having an informed conversation around retirement income”. Managing income and risks can be particularly difficult for people later in retirement if they suffer from cognitive impairment.
And finally:
Despite the heterogeneous nature of retirees, at least 94 per cent of pension assets are in account-based pensions, which provide flexibility but lack risk management features and may not deliver high levels of income from a given accumulated balance. The lack of a significant market for products with longevity risk protection sets Australia apart from most other developed economies. Evidence suggests that the major worry among retirees and pre-retirees is exhausting their assets in retirement. An individual with an account-based pension can reduce the risk of outliving their wealth by living more frugally in retirement and drawing down benefits at the minimum allowable rates. This is what the majority of retirees with account-based pensions do, which reduces their standard of living. The difficulty in managing this risk is also exacerbated by the uncertainty as to how long a retiree will live.
So all the issues that caused the Govt to panic to make the Grandfather Amendments are there, but the wording is of course "coded" so as to not lay blame on BigSuper or the Govt itself, ie it is a TYPICAL Report in "times of need" (ie to cover up) but is really "much ado about nothing".
The most poignant issue as seen is "cognitive impairment later in retirement" and irony is that such is the reason the Govt has got away with the (soon to be) Grandfather Rules for so long. That is to say that Age Pensioners get taken in by the shonky "advisers" at age 65 to simply drawdown the minimum amount and if they were not bright enough to SEE they were being taken in (for the benefit OF the adviser) at 65, then by 75 they have no hope at all to do anything as each year they see their Age Pension drop by 5% or more.
Complaint to their adviser will be met with a shrug of the shoulders and "that's the Govt, not us".
Complaint to Centrelink will be same shrug of shoulders and "sorry, that's how the Legislation works, your problem is you took bad advice to keep increasing your capital and that means we drop your Age Pension".
Yes, the Murray Report has "done its job", so back to "Situation Normal" for BigSuper and the Govt.
That is AS LONG AS the forgotten "Stakeholder" (the Pensioner) him/her self REMAINS in a state of ignorance (aka Stockholm Syndrome) about this little $10 billion pa fiddle by the Govt.
Hitler of course has the final say with:
"It is most fortunate for governments that the people do not think"
And until recent times a Govt could get by on that basis, as people simply HATE to think.
But with Twitter etc now on the scene it is more a matter of FLIPPING (ie without actually thinking) from Grandfather to Freedom, and THAT is the $10 billion pa problem facing this Govt.
The Murray Report has several Grandfathering Recommendations for such as Negative Gearing, and all will be considered by the Govt in the fullness of time, so why was this singular provision not just put into the mix of the Report?
The simple answer is the Govt did not WANT any official comment on the REASON for the REPEAL, and let's be totally clear that the Amendment was not to "add" any new provisions but to repeal [over 20 years or so] the existing statutes that treat Income Testing of Account Based Pensions differently to all other Assets.
So repeal of those statutes simply removes the "special treatment" and the Testing reverts to the same as for any other "non-Centrelink" [eg car etc] assets. Nothing has been added.
So while the Report must therefore consider that matter "done and dusted", it does still refer to certain "symptoms" OF the issue, but without pointing too straight a finger.
"Information from stakeholders suggests that many retirees find it challenging to navigate the transition to the retirement phase of superannuation. When DC members notify their superannuation fund of their retirement, many funds recommend they speak to an affiliated financial adviser. Research has demonstrated that the quality of this advice can vary significantly. Anecdotal evidence suggests that some advisers have limited knowledge of longevity risk and how it can be managed. Although the Inquiry makes recommendations to improve the quality of advice, it will take time for such improvements to occur."
The Report goes on to say:
In any case, many people do not seek professional advice, and funds and advisers overwhelmingly recommend account-based pensions. Stakeholders advise that, for less financially literate individuals, the simplest option is to take the entire benefit as a lump sum because other options can be difficult to understand and may require completing complicated forms. A recent survey commissioned by AustralianSuper found that “… 85% of pre-retirees are not confident in having an informed conversation around retirement income”. Managing income and risks can be particularly difficult for people later in retirement if they suffer from cognitive impairment.
And finally:
Despite the heterogeneous nature of retirees, at least 94 per cent of pension assets are in account-based pensions, which provide flexibility but lack risk management features and may not deliver high levels of income from a given accumulated balance. The lack of a significant market for products with longevity risk protection sets Australia apart from most other developed economies. Evidence suggests that the major worry among retirees and pre-retirees is exhausting their assets in retirement. An individual with an account-based pension can reduce the risk of outliving their wealth by living more frugally in retirement and drawing down benefits at the minimum allowable rates. This is what the majority of retirees with account-based pensions do, which reduces their standard of living. The difficulty in managing this risk is also exacerbated by the uncertainty as to how long a retiree will live.
So all the issues that caused the Govt to panic to make the Grandfather Amendments are there, but the wording is of course "coded" so as to not lay blame on BigSuper or the Govt itself, ie it is a TYPICAL Report in "times of need" (ie to cover up) but is really "much ado about nothing".
The most poignant issue as seen is "cognitive impairment later in retirement" and irony is that such is the reason the Govt has got away with the (soon to be) Grandfather Rules for so long. That is to say that Age Pensioners get taken in by the shonky "advisers" at age 65 to simply drawdown the minimum amount and if they were not bright enough to SEE they were being taken in (for the benefit OF the adviser) at 65, then by 75 they have no hope at all to do anything as each year they see their Age Pension drop by 5% or more.
Complaint to their adviser will be met with a shrug of the shoulders and "that's the Govt, not us".
Complaint to Centrelink will be same shrug of shoulders and "sorry, that's how the Legislation works, your problem is you took bad advice to keep increasing your capital and that means we drop your Age Pension".
Yes, the Murray Report has "done its job", so back to "Situation Normal" for BigSuper and the Govt.
That is AS LONG AS the forgotten "Stakeholder" (the Pensioner) him/her self REMAINS in a state of ignorance (aka Stockholm Syndrome) about this little $10 billion pa fiddle by the Govt.
Hitler of course has the final say with:
"It is most fortunate for governments that the people do not think"
And until recent times a Govt could get by on that basis, as people simply HATE to think.
But with Twitter etc now on the scene it is more a matter of FLIPPING (ie without actually thinking) from Grandfather to Freedom, and THAT is the $10 billion pa problem facing this Govt.
Thursday, December 4, 2014
The Abbott SWOT Analysis on Grandfather
Anyone who has had anything at all to do with Marketing [Corporate or Governmental] will understand that questions like "Should we take our ship OUT of the harbour", eg Amend Legislation, are examined by the SWOT Analysis, which weighs up the competing issues of:
S - STRENGTHS
W - WEAKNESSES
O - OPPORTUNITIES
T - THREATS
But before we get the SWOT show on the road a bit of background will help.
The issue here is the 1 January 2015 amendment to the Testing Rules for Age Pensions, commonly referred to as the "Grandfather Rules", where the Grandfathered Rules are those pre 1 January 2015 and the New Rules [Deeming of Capital] are those post 1 January 2015.
The BIG Problem is that our modelling says that there is a $10 billion dollar per annum difference between PRESENT Pensioners staying Grandfathered and "sweeping" their Account Based Pension so as to go under the New Rules. To further explain, the Govt stands to LOSE that much, if all Pensioners TAKE that option. At present Big Super is working overtime to SCARE Pensioners into the protective arms of Grandfather.
We don't think there is any need to PROVE that but if examples are needed then see Ennis and Alma Revisited or Margaret or Joe or worse still is when we TRIED HARD to disprove our own findings at Devil's Advocate but it simply got 4 times as bad.
We even tried a trumped up case [in favour of Grandfather] by a Big Super Advisor Case of Victoria but it still worked out Victoria was $120,000 worse off with Grandfather.
But back to the beginning, in 2009 we offered a "Hi-Tech" service at agepensionsolutions.com which modelled the Allocated Pension for 20 years or more AND equated that to the Age Pension to assist Pensioners plan their Retirement. And it seems to have caused a bit of a stir in Big Super, or maybe just the Govt part of it.
Whatever, the seeds were sewn back then to start the process to enact [in 2015] the so called Grandfather Amendments and it seems this image is what caused the stir. The wise rule of "If it ain't BROKE, don't MESS with it" is especially relevant to amending legislation, SO [as discussed below] a big problem MUST have been seen here litigation wise.
It seems therefore that they had NOT done their own modelling many years ago when they introduced this Rule that divides your Allocated Pension Capital by your Life Expectancy, but certainly called in their own spreadsheet experts to check our modelling. And of course there is the obvious "sexist discrimination" MINEFIELD that under Grandfather Rules a Female gets about $20,000 less Age Pension over 20 years purely because women live longer than men.
And here is Twist #1 - we had thought the legislation said to divide the remaining Capital by the revised Life Expectancy every year, whereas we have now fixed that to divide START Capital by START Life Expectancy, so the effect on the Pensioner is not as bad as in the black closet [but see below], BUT obviously the Govt has done its new modelling on the proper Rule and STILL considered the result a PROBLEM.
What we did on the website was to mimic the "trendoid" manner of explaining legislation in Explanatory Memoranda etc using fictitious names, so we used Ennis and Alma from Brokeback Mountain movie for no particular reason, not realizing the irony in that choice.
To explain, Ennis was married to Alma but for 20 years was having a homosexual affair with Jack, and the whole plot resolves right down to the All American Ellen Degenerate Closet at the end.
So here is the irony that Brokeback fans [called Brokies] say that because of the refusal of Ennis to come OUT of his Ellen Degenerate Closet in that second decade of THEIR 20 year period, things went really pear shaped for them [and of course "Gay Rights"].
Then for Abbott, he has simply DEALT with the matter in his own Ellen Degenerate closet [the black box showing the second decade of the life of a Pensioner] for better or worse. BUT has he told the PENSIONER about the darker contents of his Closet?
The horrific truth Abbott is trying to hide from the PRESENT Pensioners [of 75 to 85 age band] is that the gradual diminishing of their Age Pension year by year can be AVOIDED simply by "throwing overboard" their Big Super Advisor [and Grandfather], sweeping their Account Based Pension Residual and thus going onto the New Rules.
So we can now use the SWOT to EXAMINE the better/worse.
In 2009 or so the Govt carefully considered the situation where an AGGRIEVED person might well have a CHOSE IN ACTION in a COURT WITH JURISDICTION to SEEK RELIEF from the effects of the legislation [now called Grandfather].
If the person properly DEPOSED and ARGUED their case [ie did NOT use a lawyer] then such a court would logically [behind closed doors] CONCLUDE [but not DETERMINE] that "the shit had hit the fan" and it needed to go "into damage control" by continually ADJOURNING the case until the Govt fixed the legislation.
Now we don't know here if there WAS one or more court cases or if it was perhaps based upon our "closet evidence" or other. The only thing that matters is the Govt DID initiate and now execute an amendment. Indeed, a nasty precedent case [eg Mabo] can have devastating consequences.
By DOING that the Govt has REMOVED the CHOSE IN ACTION [at least under the Grandfather legislation]. That is to say the court can now say that the legislation now allows the Pensioner to escape Grandfather by "sweeping" their Allocated Pension to a new one whereby they must use New Rules [so case dismissed with costs].
And as for a Pensioner pleading PAST losses, the Govt in 2011 was very quick to do a clandestine fiddle with S 8 of the Acts Interpretation Act [1901], and finally we have been "locked out" of our own website [for "Unknown Unknown" reasons to use the WMD/9/11 terminology]. So all this points to that lovely High Court euphemism from Luton "it looks like minds were turned in government".
So the STRENGTHS are that Abbott has "thrown overboard" the threat of court action [ie a Precedent Case to "Open the Floodgates"], and at same time pick up an extra $40 million pa from the NEW folk on the New Rule.
But it is a TWO Edged Sword, because one edge helps Abbott by preventing any court challenges but the other edge simply allows Pensioners to escape the Grandfather Rules without the fuss of going to court.
And then the Sword becomes The Sword of Damocles because the thin thread that holds it up is MISinformation [and spin] by Big Super to Pensioners regarding the issue from above still hidden in the CLOSET.
That is to say Abbot plans to save $40 million pa because the New Rule "stings up front" so New applicants for the Age Pension will be worse off in the short term, BUT with the Grandfather Rule "the sting is in the tail" and as such DENYING the 1 million or so 75 years old plus Pensioners of about $10 billion pa.
And the thread holding up the Sword of Damocles is simply that they DON'T KNOW THAT, and the THREAT is they COULD - so we move to that part of the SWOT, as is quite normal, dealing with the SWOT elements out of strict order.
As stated above the only issue that would prevent the Govt going down the gurgler by $10 billion pa is the IGNORANCE of the Pensioners to the true situation, and as stated the WMD Terror Campaign of Big Super is presently doing its job for the Govt in maintaining the ignorance.
On the other hand the ubiquitous "Social Media" can very quickly "spread the word" to bring about the "snowball effect" and down comes the Sword of Damocles on Abbott's Feast/Party [pun intended].
It's as simple as that, ie once the worm starts to turn it can very quickly turn totally. At present the worm has not even started to turn but it is anybody's guess as to how soon it might start and how quickly it might DESTROY.
The obvious answer/opportunity/imperative for Abbott is to END the THREAT.
To continue the analogy, he has created the Sword of Damocles as the means of solving the issue, but that does not mean he can't replace the present gossamer thread holding it up with a thumping great length of high tensile chain so that the Sword will STAY up there.
There are two ways to do that - a stupid way and a sensible [legal] way and while Abbott has traditionally taken the stupid way and insisted on putting both feet in his mouth, we will explain the options for him here.
The stupid way is to continue his "how bizarre" Brogdonian ways of 2005 and have ME [the author of the websites, LOPS and blogs] "taken out".
Firstly I have taken the usual "Pauline Hanson Personal Security" remedy here, so my death would point straight TO Abbott, but secondly it is not ME that is the problem but my websites, LOPS and blogs that are the problem. My death would simply leave all the THREAT sitting "in the cloud"
The sensible way is to simply "convince me" via the legal paths available to Abbott to REMOVE all my web content.
I obviously will not be explaining here how those paths work but by way of a Ministerial to my Local MP [the democratic method of the Constitution].
So one remaining question lingers as to is it possible "others" might come forward and do the same "whistle-blowing"?
Of course I can't answer that but I can give my estimate on the chance of that happening as being "about 1 in 5 billion".
There is nothing egotistical in the estimate but simply a statement that the Good Lord or HAL deemed [no pun intended] to give me Lucy type powers to be able to "analyse situations" well beyond the normal capabilities of J Doe, and I have used them from time to time DESPITE the detriment to my personal life.
I don't think there are any others living in Australia at present that have that burden, hence my 1 in 5 billion estimate.
In other words the term Conspiracy Theory is very commonly used to describe crackpot ideas, most without any merit in fact. But my Modus Operandi totally supports the suppositions WITH fact, so ceases to BE Conspiracy Theory.
I rest my case/SWOT.
S - STRENGTHS
W - WEAKNESSES
O - OPPORTUNITIES
T - THREATS
But before we get the SWOT show on the road a bit of background will help.
Background
The issue here is the 1 January 2015 amendment to the Testing Rules for Age Pensions, commonly referred to as the "Grandfather Rules", where the Grandfathered Rules are those pre 1 January 2015 and the New Rules [Deeming of Capital] are those post 1 January 2015.
The BIG Problem is that our modelling says that there is a $10 billion dollar per annum difference between PRESENT Pensioners staying Grandfathered and "sweeping" their Account Based Pension so as to go under the New Rules. To further explain, the Govt stands to LOSE that much, if all Pensioners TAKE that option. At present Big Super is working overtime to SCARE Pensioners into the protective arms of Grandfather.
We don't think there is any need to PROVE that but if examples are needed then see Ennis and Alma Revisited or Margaret or Joe or worse still is when we TRIED HARD to disprove our own findings at Devil's Advocate but it simply got 4 times as bad.
We even tried a trumped up case [in favour of Grandfather] by a Big Super Advisor Case of Victoria but it still worked out Victoria was $120,000 worse off with Grandfather.
But back to the beginning, in 2009 we offered a "Hi-Tech" service at agepensionsolutions.com which modelled the Allocated Pension for 20 years or more AND equated that to the Age Pension to assist Pensioners plan their Retirement. And it seems to have caused a bit of a stir in Big Super, or maybe just the Govt part of it.
Whatever, the seeds were sewn back then to start the process to enact [in 2015] the so called Grandfather Amendments and it seems this image is what caused the stir. The wise rule of "If it ain't BROKE, don't MESS with it" is especially relevant to amending legislation, SO [as discussed below] a big problem MUST have been seen here litigation wise.
We have just now added the black "closet" [to be explained shortly] to highlight the area of our modelling which had inadvertently caused the Govt to SEE the effects of the Income Testing Rules once the Pensioner got to 75 or so.
It seems therefore that they had NOT done their own modelling many years ago when they introduced this Rule that divides your Allocated Pension Capital by your Life Expectancy, but certainly called in their own spreadsheet experts to check our modelling. And of course there is the obvious "sexist discrimination" MINEFIELD that under Grandfather Rules a Female gets about $20,000 less Age Pension over 20 years purely because women live longer than men.
And here is Twist #1 - we had thought the legislation said to divide the remaining Capital by the revised Life Expectancy every year, whereas we have now fixed that to divide START Capital by START Life Expectancy, so the effect on the Pensioner is not as bad as in the black closet [but see below], BUT obviously the Govt has done its new modelling on the proper Rule and STILL considered the result a PROBLEM.
What we did on the website was to mimic the "trendoid" manner of explaining legislation in Explanatory Memoranda etc using fictitious names, so we used Ennis and Alma from Brokeback Mountain movie for no particular reason, not realizing the irony in that choice.
To explain, Ennis was married to Alma but for 20 years was having a homosexual affair with Jack, and the whole plot resolves right down to the All American Ellen Degenerate Closet at the end.
So here is the irony that Brokeback fans [called Brokies] say that because of the refusal of Ennis to come OUT of his Ellen Degenerate Closet in that second decade of THEIR 20 year period, things went really pear shaped for them [and of course "Gay Rights"].
Then for Abbott, he has simply DEALT with the matter in his own Ellen Degenerate closet [the black box showing the second decade of the life of a Pensioner] for better or worse. BUT has he told the PENSIONER about the darker contents of his Closet?
"That's Not a Twist --"
To continue the movie analogy, we add the Paul Hogan "-- THIS is a Twist"The horrific truth Abbott is trying to hide from the PRESENT Pensioners [of 75 to 85 age band] is that the gradual diminishing of their Age Pension year by year can be AVOIDED simply by "throwing overboard" their Big Super Advisor [and Grandfather], sweeping their Account Based Pension Residual and thus going onto the New Rules.
So we can now use the SWOT to EXAMINE the better/worse.
STRENGTHS
Please excuse the legalese to describe the situation, but it is necessary.In 2009 or so the Govt carefully considered the situation where an AGGRIEVED person might well have a CHOSE IN ACTION in a COURT WITH JURISDICTION to SEEK RELIEF from the effects of the legislation [now called Grandfather].
If the person properly DEPOSED and ARGUED their case [ie did NOT use a lawyer] then such a court would logically [behind closed doors] CONCLUDE [but not DETERMINE] that "the shit had hit the fan" and it needed to go "into damage control" by continually ADJOURNING the case until the Govt fixed the legislation.
Now we don't know here if there WAS one or more court cases or if it was perhaps based upon our "closet evidence" or other. The only thing that matters is the Govt DID initiate and now execute an amendment. Indeed, a nasty precedent case [eg Mabo] can have devastating consequences.
By DOING that the Govt has REMOVED the CHOSE IN ACTION [at least under the Grandfather legislation]. That is to say the court can now say that the legislation now allows the Pensioner to escape Grandfather by "sweeping" their Allocated Pension to a new one whereby they must use New Rules [so case dismissed with costs].
And as for a Pensioner pleading PAST losses, the Govt in 2011 was very quick to do a clandestine fiddle with S 8 of the Acts Interpretation Act [1901], and finally we have been "locked out" of our own website [for "Unknown Unknown" reasons to use the WMD/9/11 terminology]. So all this points to that lovely High Court euphemism from Luton "it looks like minds were turned in government".
So the STRENGTHS are that Abbott has "thrown overboard" the threat of court action [ie a Precedent Case to "Open the Floodgates"], and at same time pick up an extra $40 million pa from the NEW folk on the New Rule.
WEAKNESSES
Abbott has effectively drawn a line in the sand of 1 January 2015 and dug in his Sword to mark "Checkpoint Charlie" where "certain people are allowed to go in certain directions across the line at certain times".But it is a TWO Edged Sword, because one edge helps Abbott by preventing any court challenges but the other edge simply allows Pensioners to escape the Grandfather Rules without the fuss of going to court.
And then the Sword becomes The Sword of Damocles because the thin thread that holds it up is MISinformation [and spin] by Big Super to Pensioners regarding the issue from above still hidden in the CLOSET.
That is to say Abbot plans to save $40 million pa because the New Rule "stings up front" so New applicants for the Age Pension will be worse off in the short term, BUT with the Grandfather Rule "the sting is in the tail" and as such DENYING the 1 million or so 75 years old plus Pensioners of about $10 billion pa.
And the thread holding up the Sword of Damocles is simply that they DON'T KNOW THAT, and the THREAT is they COULD - so we move to that part of the SWOT, as is quite normal, dealing with the SWOT elements out of strict order.
THREATS
As stated above the only issue that would prevent the Govt going down the gurgler by $10 billion pa is the IGNORANCE of the Pensioners to the true situation, and as stated the WMD Terror Campaign of Big Super is presently doing its job for the Govt in maintaining the ignorance.
On the other hand the ubiquitous "Social Media" can very quickly "spread the word" to bring about the "snowball effect" and down comes the Sword of Damocles on Abbott's Feast/Party [pun intended].
It's as simple as that, ie once the worm starts to turn it can very quickly turn totally. At present the worm has not even started to turn but it is anybody's guess as to how soon it might start and how quickly it might DESTROY.
OPPORTUNITIES
The obvious answer/opportunity/imperative for Abbott is to END the THREAT.
To continue the analogy, he has created the Sword of Damocles as the means of solving the issue, but that does not mean he can't replace the present gossamer thread holding it up with a thumping great length of high tensile chain so that the Sword will STAY up there.
There are two ways to do that - a stupid way and a sensible [legal] way and while Abbott has traditionally taken the stupid way and insisted on putting both feet in his mouth, we will explain the options for him here.
The stupid way is to continue his "how bizarre" Brogdonian ways of 2005 and have ME [the author of the websites, LOPS and blogs] "taken out".
Firstly I have taken the usual "Pauline Hanson Personal Security" remedy here, so my death would point straight TO Abbott, but secondly it is not ME that is the problem but my websites, LOPS and blogs that are the problem. My death would simply leave all the THREAT sitting "in the cloud"
The sensible way is to simply "convince me" via the legal paths available to Abbott to REMOVE all my web content.
I obviously will not be explaining here how those paths work but by way of a Ministerial to my Local MP [the democratic method of the Constitution].
So one remaining question lingers as to is it possible "others" might come forward and do the same "whistle-blowing"?
Of course I can't answer that but I can give my estimate on the chance of that happening as being "about 1 in 5 billion".
There is nothing egotistical in the estimate but simply a statement that the Good Lord or HAL deemed [no pun intended] to give me Lucy type powers to be able to "analyse situations" well beyond the normal capabilities of J Doe, and I have used them from time to time DESPITE the detriment to my personal life.
I don't think there are any others living in Australia at present that have that burden, hence my 1 in 5 billion estimate.
In other words the term Conspiracy Theory is very commonly used to describe crackpot ideas, most without any merit in fact. But my Modus Operandi totally supports the suppositions WITH fact, so ceases to BE Conspiracy Theory.
I rest my case/SWOT.
Wednesday, December 3, 2014
Bill and Mary
A Big Super entity called Money Managers has done a better than most [but still a "One Year Wonder"] paper on Grandfather vs Deeming and here is their example.
They have not given "silly names" to this couple so we call them Bill and Mary. Further info says:
To understand the impact of the proposed change, we have considered a hypothetical couple and modelled their Government income support payments (in this case, the age pension) on different levels of superannuation.
In each case we have taken a homeowner couple, both aged 65, and with the same level of assets except for their ABP.
For the purposes of the ABP, we have assumed it will automatically revert to the surviving pensioner. The life expectancy, for the “deductible amount” calculation is 21.62 years (ie, for a 65-year-old female).
It is therefore irrelevant if the primary pensioner is the female, or the male with a reversion to his spouse.
Each scenario was modelled to firstly consider the impact on the couple’s combined age pension under the assets test, and then to consider it from an income test where the ABP commenced on or after 1 January 2015, and secondly, prior to 1 January 2015.
In each case where we modelled the income test impact based on the grandfather income testing (ie, pre-1 January 2015), we made the assumption that the ABP income drawn, less the deductible amount, plus deemed income, did not exceed the income test threshold (ie, $276.00 per fortnight).
This case stands above most as they have not simply advised the couple to use the Min Drawdown, but it seems they went for the next easiest [for them] option of match the Drawdown to the historical Interest of the Fund, meaning that when the couple are supposed to die they have exactly the same amount as they started with [to leave to "interested parties", eg the Advisor].
So using a full 20 year projection, the year #1 result of course holds throughout because the Capital remains as the elephant in the room and neither Grandfather nor Deeming have an effect via Income Testing. The total Age Pension is 86.95% of the Maximum, or $605,289 total over 20 years.
Now we say "better than most" because the results for Min Drawdown say the plan above got Bill and Mary $36,761 over 20 years extra Age Pension, for simple reason that for Min Drawdown the elephant grew bigger.
But the logical solution for the couple [ie any couple] is to USE their Super Funds for THEIR enjoyment, so we asked the LOPS to tell us how much Drawdown to deplete funds at 20 year mark [their Advisor will not be pleased]. As you would expect from all other results here, they are $65,364 BETTER off with the New Rules than under Grandfathering getting 96.36% of the Max Age Pension.
So same message here ie throw BOTH elephant and Grandfather overboard [as well as your Advisor of course] and it's the good old "we got the money".
Will clients be better or worse off?
The answer is very much a case of “it depends”.To understand the impact of the proposed change, we have considered a hypothetical couple and modelled their Government income support payments (in this case, the age pension) on different levels of superannuation.
In each case we have taken a homeowner couple, both aged 65, and with the same level of assets except for their ABP.
For the purposes of the ABP, we have assumed it will automatically revert to the surviving pensioner. The life expectancy, for the “deductible amount” calculation is 21.62 years (ie, for a 65-year-old female).
It is therefore irrelevant if the primary pensioner is the female, or the male with a reversion to his spouse.
Each scenario was modelled to firstly consider the impact on the couple’s combined age pension under the assets test, and then to consider it from an income test where the ABP commenced on or after 1 January 2015, and secondly, prior to 1 January 2015.
In each case where we modelled the income test impact based on the grandfather income testing (ie, pre-1 January 2015), we made the assumption that the ABP income drawn, less the deductible amount, plus deemed income, did not exceed the income test threshold (ie, $276.00 per fortnight).
This case stands above most as they have not simply advised the couple to use the Min Drawdown, but it seems they went for the next easiest [for them] option of match the Drawdown to the historical Interest of the Fund, meaning that when the couple are supposed to die they have exactly the same amount as they started with [to leave to "interested parties", eg the Advisor].
So using a full 20 year projection, the year #1 result of course holds throughout because the Capital remains as the elephant in the room and neither Grandfather nor Deeming have an effect via Income Testing. The total Age Pension is 86.95% of the Maximum, or $605,289 total over 20 years.
Now we say "better than most" because the results for Min Drawdown say the plan above got Bill and Mary $36,761 over 20 years extra Age Pension, for simple reason that for Min Drawdown the elephant grew bigger.
But the logical solution for the couple [ie any couple] is to USE their Super Funds for THEIR enjoyment, so we asked the LOPS to tell us how much Drawdown to deplete funds at 20 year mark [their Advisor will not be pleased]. As you would expect from all other results here, they are $65,364 BETTER off with the New Rules than under Grandfathering getting 96.36% of the Max Age Pension.
So same message here ie throw BOTH elephant and Grandfather overboard [as well as your Advisor of course] and it's the good old "we got the money".
Monday, December 1, 2014
The [DECEPTION] Case of Victoria
If you read the the Case of Margaret you will see her initial comments to us were:
"I have read heaps of articles from financial advisors most of them say the new deeming rules will mainly effect folk who have lower nest eggs."
And our comment:
"So her research confirms ours that "Big Super" is conducting a Terror Campaign to scare Pensioners to REMAIN on the so called Grandfather Rules, when that advice flies totally in the face of all the modelling we have done [which SURELY the Govt has also done and is AWARE of the deception] where indications to date show the average Pensioner stands to LOSE $50,000 or so over 20 years by taking that advice to remain on the Grandfather Rules."
To explain further about this deception, Margaret had actually sent us one such article that had her terrorised, and hence was asking us for proper advice based on 20 year modelling. Here is the hypothetical case from Affinity Wealth Services:
Case Study – Impact of Deeming on Account Based Pensions *
Victoria is 65 years of age, a single non-homeowner and has just retired. She has $300,000 in a superannuation account which she wishes to use to commence an Account Based Pension. Based on her life expectancy of 21.62 years, her Centrelink Deductible Amount would be $13,880 (i.e. $300,000/21.62). She also has $45,000 in a bank account.
Under the current rules, if Victoria draws the minimum annual income of $15,000 (i.e. 5% of $300,000), around $1,120 would be counted towards the Centrelink income test (i.e. $15,000 - $13,880). In addition, Victoria would have deemed income of $900 from her bank account. Her total counted assets would be $345,000. Victoria is under the threshold for both the income and assets test for a single non-homeowner and would therefore be entitled to the full Centrelink Age Pension (currently $842.80 per fortnight).
In contrast, if Victoria was to be assessed under the new rules, the entire $345,000 in financial assets would be deemed, equating to annual assessable income of $11,355 under the income test. Her total counted assets would remain at $345,000. When Victoria is assessed under the asset and income test, the income test now produces a lower result because of the high levels of deemed income. This in turn would reduce Victoria’s fortnightly age pension benefit to $704 per fortnight, a reduction of more than $3,500 per annum.
* Assumptions: Centrelink Rates and Thresholds as at 1 July 2014.
There are some very obvious indications that spring to the eye to say the example has been "cooked" to assist the Govt terrorising Pensioners to Go for Grandfather, and the most obvious one is that Victoria is not a home owner. Now as seen for the REAL case of Margaret, it would be most unusual that a woman who had accumulated $300,000 in Super had thrown away up to a million dollars on rent over her 50 years or so of working life.
Of less importance is Victoria does not even own a kitchen chair [to keep her Assets artificially low] but has $45,000 in the bank [to start her deeming on warm].
So by inspecting Margaret's case you can see if Victoria had contacted us and not Affinity she could have "set the sails on her ship" and enjoyed her retirement by spending her hard earned Super AND getting another $119,266 from the Govt by avoiding Grandfather [or $95,061 if Victoria was a bloke].
But on behalf of Affinity, obediently protecting the Govt interests, there will be the insinuation that we "cheated" by allowing Victoria to spend her own money, so we go around in the same legal circle.
The circle is that the Govt virtually compels people to sacrifice income over their working life "to use in Retirement". Then at 65 the Govt puts a big "Use By Date - Age 85" on the Pensioner's forehead. Then the Govt says if you DO use it [rather than just nibble at the edges] Grandfather will get out his big stick and clobber you about $100,000, and an extra $25,000 if born a woman.
So as always the circle is completed by the very legitimate legal argument that such is totally discriminatory [particularly to women] but most of all is CONFIRMED as such by the ACTION of the Govt in Amending the legislation to remove the discrimination.
So all that remains for Govt is to MAINTAIN the lie [that Grandfather is nice] for another 20 years, or they are looking at about $200 billion extra Age Pension payments, which even makes Costello's Future Fund look a little thin.
And there is another delicious irony that if Grandfather cat DID get out of the bag, the Govt would be forced to dip into the Future Fund, which would be poetic justice as it is a Piggy Bank for those who never contributed to their super in the first place.
"I have read heaps of articles from financial advisors most of them say the new deeming rules will mainly effect folk who have lower nest eggs."
And our comment:
"So her research confirms ours that "Big Super" is conducting a Terror Campaign to scare Pensioners to REMAIN on the so called Grandfather Rules, when that advice flies totally in the face of all the modelling we have done [which SURELY the Govt has also done and is AWARE of the deception] where indications to date show the average Pensioner stands to LOSE $50,000 or so over 20 years by taking that advice to remain on the Grandfather Rules."
To explain further about this deception, Margaret had actually sent us one such article that had her terrorised, and hence was asking us for proper advice based on 20 year modelling. Here is the hypothetical case from Affinity Wealth Services:
Case Study – Impact of Deeming on Account Based Pensions *
Victoria is 65 years of age, a single non-homeowner and has just retired. She has $300,000 in a superannuation account which she wishes to use to commence an Account Based Pension. Based on her life expectancy of 21.62 years, her Centrelink Deductible Amount would be $13,880 (i.e. $300,000/21.62). She also has $45,000 in a bank account.
Under the current rules, if Victoria draws the minimum annual income of $15,000 (i.e. 5% of $300,000), around $1,120 would be counted towards the Centrelink income test (i.e. $15,000 - $13,880). In addition, Victoria would have deemed income of $900 from her bank account. Her total counted assets would be $345,000. Victoria is under the threshold for both the income and assets test for a single non-homeowner and would therefore be entitled to the full Centrelink Age Pension (currently $842.80 per fortnight).
In contrast, if Victoria was to be assessed under the new rules, the entire $345,000 in financial assets would be deemed, equating to annual assessable income of $11,355 under the income test. Her total counted assets would remain at $345,000. When Victoria is assessed under the asset and income test, the income test now produces a lower result because of the high levels of deemed income. This in turn would reduce Victoria’s fortnightly age pension benefit to $704 per fortnight, a reduction of more than $3,500 per annum.
* Assumptions: Centrelink Rates and Thresholds as at 1 July 2014.
There are some very obvious indications that spring to the eye to say the example has been "cooked" to assist the Govt terrorising Pensioners to Go for Grandfather, and the most obvious one is that Victoria is not a home owner. Now as seen for the REAL case of Margaret, it would be most unusual that a woman who had accumulated $300,000 in Super had thrown away up to a million dollars on rent over her 50 years or so of working life.
Of less importance is Victoria does not even own a kitchen chair [to keep her Assets artificially low] but has $45,000 in the bank [to start her deeming on warm].
So by inspecting Margaret's case you can see if Victoria had contacted us and not Affinity she could have "set the sails on her ship" and enjoyed her retirement by spending her hard earned Super AND getting another $119,266 from the Govt by avoiding Grandfather [or $95,061 if Victoria was a bloke].
But on behalf of Affinity, obediently protecting the Govt interests, there will be the insinuation that we "cheated" by allowing Victoria to spend her own money, so we go around in the same legal circle.
The circle is that the Govt virtually compels people to sacrifice income over their working life "to use in Retirement". Then at 65 the Govt puts a big "Use By Date - Age 85" on the Pensioner's forehead. Then the Govt says if you DO use it [rather than just nibble at the edges] Grandfather will get out his big stick and clobber you about $100,000, and an extra $25,000 if born a woman.
So as always the circle is completed by the very legitimate legal argument that such is totally discriminatory [particularly to women] but most of all is CONFIRMED as such by the ACTION of the Govt in Amending the legislation to remove the discrimination.
So all that remains for Govt is to MAINTAIN the lie [that Grandfather is nice] for another 20 years, or they are looking at about $200 billion extra Age Pension payments, which even makes Costello's Future Fund look a little thin.
And there is another delicious irony that if Grandfather cat DID get out of the bag, the Govt would be forced to dip into the Future Fund, which would be poetic justice as it is a Piggy Bank for those who never contributed to their super in the first place.
The Devil's Advocate
We tried to play the Devil's Advocate for the Govt, thinking that the Allocated Pension of $200,000 we gave to Ennis and Alma was maybe not realistic, and giving the wrong impression in the results.
Alas the REVERSE is true. We increased the Allocated Pension in steps, to $300,000, then $500,000 and finally $800,000 and here are the results.
As you will see as the Allocated Pension quadruples from $200,000 to $800,000 so does the difference between the Testing regimes quadruple from about $50,000 to almost $200,000. That is to say that while the actual Age Pension over 20 years [for the RED Grandfather Squares] decreased from $650,000 down to $200,000, the GREEN Square Testing is not as severe, so the difference increased.
That is obviously NOT what the Govt wanted to find, so all the MORE reason they need to keep this all TOP SECRET to KEEP all the current Pensioners under the control of Grandfather.
If you have not fully understood the maths involved here, the example for $800,000 Allocated Pension below helps greatly in understanding the issue.
This is the New Rule Testing and you will see for Year #1 that while the Income Deeming is reducing the Age Pension from $33,000 pa down to about $22,000, the Asset Test has already nailed it down to $10,000. Then as the Capital reduces, the Age Pension gradually and linearly increases year by year to age 83 when the full pension starts to apply [albeit ABS says the Pensioner should die right there and the Age Pension end].
But for the Grandfather Rule [follow the RED Resultant Pension Line in middle graph] everything is the same up to age 75 when, Bingo, the Income Test starts to chomp in more and more till no Age Pension at all at age 85.
So our original estimate of the Govt LOSS, being some $5 billion pa if these 75 to 85 years olds get smart and get short of Grandfather, is now looking very light on and more like $10 billion pa, meaning TOP SECRET alert is almost mandatory.
So back to the SWOT Analysis to help Abbott keep his dirty secret.
Alas the REVERSE is true. We increased the Allocated Pension in steps, to $300,000, then $500,000 and finally $800,000 and here are the results.
As you will see as the Allocated Pension quadruples from $200,000 to $800,000 so does the difference between the Testing regimes quadruple from about $50,000 to almost $200,000. That is to say that while the actual Age Pension over 20 years [for the RED Grandfather Squares] decreased from $650,000 down to $200,000, the GREEN Square Testing is not as severe, so the difference increased.
That is obviously NOT what the Govt wanted to find, so all the MORE reason they need to keep this all TOP SECRET to KEEP all the current Pensioners under the control of Grandfather.
If you have not fully understood the maths involved here, the example for $800,000 Allocated Pension below helps greatly in understanding the issue.
This is the New Rule Testing and you will see for Year #1 that while the Income Deeming is reducing the Age Pension from $33,000 pa down to about $22,000, the Asset Test has already nailed it down to $10,000. Then as the Capital reduces, the Age Pension gradually and linearly increases year by year to age 83 when the full pension starts to apply [albeit ABS says the Pensioner should die right there and the Age Pension end].
But for the Grandfather Rule [follow the RED Resultant Pension Line in middle graph] everything is the same up to age 75 when, Bingo, the Income Test starts to chomp in more and more till no Age Pension at all at age 85.
So our original estimate of the Govt LOSS, being some $5 billion pa if these 75 to 85 years olds get smart and get short of Grandfather, is now looking very light on and more like $10 billion pa, meaning TOP SECRET alert is almost mandatory.
So back to the SWOT Analysis to help Abbott keep his dirty secret.
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