Note: During the past few months, with the assistance of advocacy group Save Our Super (and using financial modelling provided by Sean Corbett), SuperGuide has highlighted the inequities and disincentives created by the January 2017 changes to the Age Pension assets test. SuperGuide has named this policy debacle, Retirementgate, and many other members of the community have also now adopted this term.
Background: Doubling the effect of the Age Pension taper rate from 1 January 2017 (losing $3 for every $1,000 of assets over the assets test threshold, rather than losing $1.50 for every $1,000 of assets), means that Australian couples are effectively taxed 150% for lifetime super savings between $400,000 and $800,000. This hit means that doubling super savings will convert to about $11,000 less total income each year. Single Australians have also been hit hard by the changes. You can read a full explanation of Retirementgate, including background articles in the SuperGuide companion article Retirementgate: Government’s Age Pension debacle hits middle Australia
Introducing Sean Corbett: We have received many questions from readers, including those challenging the assumed rate of return in the Save Our Super paper’s modelling, and questions relating to the rate of savings withdrawals to meet minimum pension payment requirements. Sean Corbett, the man behind the financial modelling which triggered the Retirementgate series of articles on SuperGuide, has kindly provided some background analysis.
I think it is important to understand that the analysis of the sweet spot and the savings trap in Save Our Super’s paper is based on the situation at the point of retirement and that it will, of course, change over the course of retirement. The figures and graphs contained in that paper are an initial snapshot, not a narrative of what happens over the course of retirement.