PUSHMI-PULLYU POLITICS

Watching Wayne Swan last night, putting his spin on pensions and superannuation, I thought of Rex Harrison as Dr. Dolittle and his double-headed pushmi-pullyu llama. A confused animal trying to go both ways at once and getting nowhere. In this ‘work longer, retire later and then live on less’ Budget they are trying to push you and pull you at the same time.

On the one hand they are pushing the retirement age up from 65 to 67 while cutting back on what you can put into your super funds from lump sums and salary sacrifice.

The Government argument is that we are living years longer than we did when the pension was first introduced 100 years ago. And that’s true. And the number of working taxpayers funding those pensions is shrinking in the inverted pyramid. And that is also true.

And unlike some countries, like the United States, where you get a Social Security number the day you start work and keep it until you retire and start collecting benefits, we don’t have a separate dedicated retirement tax.

But shouldn’t that make the government want you put more and more into super so that you retire with enough money to make you ineligible for a pension?

The more self-funded retirees, the less pressure on pension funds. Discouraging more super contributions is crazy. Especially at a time when super funds are on the nose because people have lost up to a third of their retirement pot and are being forced to retire later anyway.

(One thing that has largely gone unnoticed is the recommendation to increase the age at which you can redeem what super you are left with to 67).

It all doesn’t make sense.  Long gone is the Paul Keating dream, from when compulsory super was first introduced at 3% in the 1980s, to gradually increase it from 9% to 12 and eventually 15%.

But back to the pension. Fifty-seven is the magic number. If that’s your age now then sorry you won’t be able to retire at 65 in 2017. And after the new level kicks in – six months every two years – it reaches 67 in 2023.

The same way they have been gradually lifting the retirement age for women from 60 to 65. It’s now 63 and if you were born on or after January 1, 1949 then it will be 65. And eventually 67.

So remember the mantra: ‘work longer, retire later and then live on less’. And you’d better get used to it.

Wednesday, May 13 , 2009

© Copyright Derryn Hinch 2009