Just in case you had any doubt, your Super’s Rooted!

This just in from Ross Gittins:

Super fund returns have been bad lately, right? Wrong. They have been fabulous – so good, in fact, that they are actually an illusion.

Australia’s super fund managers are the Wizards of Oz, quaking behind a curtain of unlisted asset valuations and waiting for Dorothy to pull the curtain aside and expose their pitiful reality.

In fact super performances could be worse this year than the sharemarket, which is the reverse of what happened in 2008 when super funds on average outperformed the sharemarket by more than 50 per cent.

If the sharemarket is steady this year or even goes up, and published super fund returns fall heavily – which is entirely possible, even likely – it will be an absolute disaster for the industry … and the government.

After all, super is mandatory in this country. So far super funds have been a refuge from the horrors of the sharemarket for which politicians can take credit, but that will change in 2009 because their diversification into unlisted assets over the past decade will start to work against them. Those in the superannuation business talk about little else these days.

It’s simply because investments in direct property, direct infrastructure, hedge funds, and private equity are valued only periodically, often just once a year. What’s more, market valuations are not used, but rather discounted cash flows and net present value of income flows using capitalisation rates.

The future cash and income flows are little more than a guess these days, and capitalisation rates are moving sharply against the funds.

So it is imperative that super fund members get out while they can. The risk of staying in a superannuation default fund is now incredibly high.

If you can cash your fund in, do so; if it’s too early to retire, then switch to a 100 per cent listed option within the fund. You will be overpaid by at least 10 per cent for your default fund units and make an instant profit of that amount.

The listed versions of the funds’ unlisted assets have all collapsed in value, but in many cases the unlisted valuations reflected in the value of the core fund have not moved or even in some cases gone up. This is about to catch up with the funds in a big way.

The super funds’ median return in January was -1.85 per cent according to SuperRatings, and for the year to January 31 it was -17.68 per cent, even though Australian shares were down 5 per cent in the month and 37 per cent in year. The MSCI global index fell 40 per cent.

This was generally reported as being dreadful and a cause for despondency and alarm, but in fact it was spectacularly good and normally there would be high fives around the super funds’ offices when such results were published.

But there are no high fives, only fear, because every super fund CEO and chief investment officer knows what’s buried inside their funds and they know what’s coming at them this year.

The allocations to unlisted assets varies widely of course, but a typical fund is roughly as follows: Australian direct property 7 per cent; international direct property, 5 per cent; international infrastructure 7 per cent; Australian infrastructure 5 per cent; absolute return hedge funds (growth) 3 per cent; absolute return hedge funds (defensive) 3 per cent; international private equity, 3 per cent; Australian private equity, 1 per cent.

The usual practice is to value a quarter of these portfolios each quarter, which means each asset is valued once a year.

However the two big industry fund vehicles – Industry Super Property Trust (ISPT) and Industry Funds Management (IFM) – revalue their entire portfolios every quarter.

The valuations are usually done by the major accounting firms, and audited by another one of them once a year in July.

In the December quarter, the $6.8 billion ISPT core fund suffered a fall of $370 million, or 5.4 per cent for the quarter, which seems to have been the first decline. IFM’s Australian book was reduced by 5 per cent in the December quarter and its offshore assets by 10 per cent.

Listed property trusts have fallen at least 50 per cent. In many cases listed infrastructure funds have dropped by much more than 50 per cent.

So are the listed funds undervalued or are the unlisted funds overvalued?

And then there are the hedge funds and private equity funds, as well as the super funds’ own direct property and infrastructure (not via ISPT and IFM).

In many cases, geared hedge and private equity funds are now worthless because underlying asset values have fallen 50 per cent behind a 60 per cent gearing ratio. Many of these will only hit the super funds’ core fund valuations on June 30 this year, when the unlisted portfolios are valued and audited.

I repeat: get out while you can.

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108 Responses

  1. So it is imperative that super fund members get out while they can…I repeat: get out while you can.

    Oh yeah? Employers are compelled by law to pay into compulsory superannuation an amount equivalent to 9% of their employees’ wages or salary.

    How does this genius suggest most of these employees ‘get out’ of this arrangement (aside from setting up their own self-managed super fund – a move the average ‘unsophisticated’ investor would find rather daunting)?

  2. So it is imperative that super fund members get out while they can. The risk of staying in a superannuation default fund is now incredibly high.

    What does he mean? Does he mean to get out of the default funds into specific funds?

    My super is split across agressive and cash accounts (by my choice). Does that mean I am OK?

    I’m so confused.

  3. Pardon my ignorance (finance illiterate).

    then switch to a 100 per cent listed option within the fund.

    What means this?

  4. Ross

    You’re not Robinson Crusoe.

  5. Can I be Man Friday?

  6. then switch to a 100 per cent listed option within the fund

    Is that what he is on about (I missed that whils skimming his article)?

    Then what he means is that members should ensure that their particular fund option is one that is weighted 100% to listed securities (ordinary shares listed on the ASX), rather than a mix of securities and property and/or infrastructure and/or other unlisted investments.

  7. Re super and: Then what he means is that members should ensure that their particular fund option is one that is weighted 100% to listed securities (ordinary shares listed on the ASX), rather than a mix of securities and property and/or infrastructure and/or other unlisted investments.

    Now how did the mums and dads miss this one.

  8. Or does he mean a fund that is listed like the ones in the SMH?

  9. I have 2 funds – ASGARD, and a Media industry fund. ASGARD’s gone to hell in a handbasket.

    Should I roll it into the industry fund and cop the 15% fee?

    Any ideas?

  10. Could be. My comprehension is poor today.

    I blame the cannabis thread.

  11. That’s bummer news reb.

    i wonder if you can rob a Super Fund?

    “Hand over my retirements savings or the Australian Prudential Regulatory Authority gets it!”

    N’

  12. It seems that you would be wiser to escort your savings to Randwick on Saturday and investing wisely on the favourite. The rules on Racing Managed Investments should be: don’t bet in the wet; don’t bet on hurdle races; be wary of 2-year-old races; and, don’t accept less than 6/4. Good luck.

  13. I can’t remember…

    And I’m also feeling a bit peckish. I too blame the cannabis thread.

    Those corn chips look good….

    CHOMP CHOMP CHOMP!

  14. Stephan,

    You forgot: odds-on, look on.

    *opens pack of TimTams*

  15. Jesus!

    Did I say that?

    Or just think it?

    Was I talking?

    Did they hear me?”

    :gulp:

  16. Ponzi schemes come to mind reb. Have you got a link to the Gittin’s article?

    Remember this revelation just recently:

    Retail superannuation funds miss out on $50bn in growth because of poor management, high fees
    https://blogocrats.wordpress.com/2008/12/21/just-super-it-is-the-most-expensive-financial-scandal-in-australia/

    ‘The facts behind the scandal

    * Retail funds pay commision to advisors
    * They have missed $50bn in growth
    * Calls for reforms grow louder

  17. Reb

    I suggest this is just another example of a ‘Minsky Moment’

  18. I will respond to this in detail tomorrow, I have a meeting tonight. Suffice to say in 90% (more even) of cases, this commentary does not apply and is mischievious misinformation. Ross, 15% is a contributions tax, not a fee (check this) and shouldn’t be payable on a switch. Most super is not invested in the types of funds referred to. Don’t “get out now”!

    1. Because you can’t anyway and
    2. Because what you need to do is make an investment selection which should never be done on the run and without due consideration.

  19. Good advice James. By the way, shouldn’t Gittins have published a disclaimer – something like: “Individual circumstances may vary. Please check with your accountant or financial adviser”?

  20. WTF? I missed out on a cannabis thread?

    What was it called?

  21. Tony, on February 25th, 2009 at 5:05 pm Said:

    Good advice James. By the way, shouldn’t Gittins have published a disclaimer – something like: “Individual circumstances may vary. Please check with your accountant or financial adviser”?

    Ross is being a little full on and I’ll be damned if I can find the column. Come on reb, this isn’t an elaborate hoax is it?

  22. There was a cannabis thread?

    By the time I retire, I should have enough super for a half ounce.

  23. Toiletboss, on February 25th, 2009 at 5:08 pm Said:

    WTF? I missed out on a cannabis thread?”

    Psssst you’ve missed nothing. Our resident hippie Joni will have a few things to say on the subject in the not so distant future.

  24. Possibly the only subject that I may speak with authority on & I missed it.

    Irony mocks me…& no, by irony I don’t mean Tom.

  25. “Ross Sharp, on February 25th, 2009 at 5:10 pm Said:

    There was a cannabis thread?

    By the time I retire, I should have enough super for a half ounce.”

    I think you’ll find that you’ll need to visit a bank for a loan if you’re intending to purchase a half ounce with your super Ross.

  26. Thanks John.

    I’ll peel my eyeballs.

  27. Toiletboss, on February 25th, 2009 at 5:13 pm Said:

    Possibly the only subject that I may speak with authority on & I missed it.

    Irony mocks me…& no, by irony I don’t mean Tom.”

    I’m looking forward to your expert opinion Boss (Lol)

  28. I pay no attention to my Super whatsoever.

    By the time I make retirement, if I live that long, citizens will be working until they are no longer physically capable at which point I will fulfill my destiny as Soilent Green; along with the rest of the extended lower class .

    I don’t trust speculative wealth.

  29. I own a Company and employ one, me, so as the Company owner I pay me, the employee, my super, as I have to by Law. So I, as the Company owner have to ,on occasions depending on cash flow, borrow from me to pay to me to pay my super. All clear?.
    Cause I may lose the lot, but at least I know I did my bit (by Law) on behalf of my employee, myself.
    That’s why,along with BAS and Insurances and so much bloody red tape and paper work, I’m winding up things soon when all I want to do is work, but stuff it. I’ve had a gut full.

  30. The attraction of retirement is a bit odd to me.

    Hanging around at home with wife and having to make specific excuses to go and see the mistress would be rather inconvenient. Very limiting. Hanging around at home would annoy wife and disrupt her entertaining activities.

    Many people die within 5 years of retiring.

    Therefore retirement is bad. Superannuation encourages retirement. Therefore superannuation is bad. Superannuation investment supports share price. Therefore share market decline is good.

  31. Lang Mack

    “That’s why,along with BAS and Insurances and so much bloody red tape and paper work, I’m winding up things soon when all I want to do is work, but stuff it. I’ve had a gut full.”

    I recall a letter I had published on workers online about the plight of small businesses. Uncle Joe was involved.

    http://workers.labor.net.au/252/letters2_business.html
    18 February 2005
    The Roundtable

    Earlier this year BRW (Business Review Weekly, May 6-12) ran a cover story titled ‘What’s holding small business back’.

    This was a roundtable discussion held between entrepreneurs, politicians and lobbysts who were
    there to thrash out the topics that need urgent attention.

    Joe Hockey, Federal Minister for Small Business was there, as was Graeme Samual, Chairman of the ACCC, along with Bob McMullan, the Opposition spokesman for Small Business, to name a few.

    Conclusions From The Table

    Following is a list of the hottest issues ˆ and possible solutions that came from these discussions. Please note ˆ IR issues are last on the list.

    1. Different regulations between between state and federal governments are a cost and annoyance to small business.

    Solution: Certain basic practices should have common requirements so that business can operate on a national level. Examine and tackle the differences

    in state and federal relations.

    2. Lack of an entrepreneurial policy.

    Solution: Develop a co-ordinated approach to entrepreneurship that sets goals and objectives. Set up programs to meet those goals.

    3. Soaring insurance premiums.

    Solution: Monitor the prices of insurance companies

    4. Unfair practices of big business to squeeze small business. Note, Mr Howard doesn’t seem to have raised this as a pressing issue.

    Solution: Implement the recent Senate committee report. Put more pressure on big business to have a conscience. Educate small business about how to

    collectively bargain and complain to the ACCC.

    5. The lack of human capital.

    Solution: Introduce mentoring programs for entrepreneurs.

    6. Too much red tape and paperwork.

    Solution: Improve the way legislation is introduced and develop a more efficient system for fixing problems that are not anticipated when regulation is introduced.

    7. Industrial relations grows worse.

    Solution: Keep in mind that employers have rights too. They create jobs and, where possible, should be assisted to make the hiring process easier. Note,

    there is no mention of taking away employee rights via abolishing ‘unfair dismissal laws’ for small businesses.

    So, what is really holding small businesses back?

    I for one, would like to know what the Federal Goverment intends to do about the first 6 items – then they can start talking IR reforms.”

    Doesn’t seem as though much has changed.

  32. Tom

    Consider this, the life expectancy of a retiree who ends up spending much time on Blogocrats is much shorter than 5 years (wink).

    Actually, my father has gone from strength to strength since retiring. He keeps physically active (walks and plays bowls competitively) and has a very active social life.

    You’ve got to stay active and interested in life and make time to do the things you enjoy doing.

  33. “Many people die within 5 years of retiring”Tom

    I’ve definitely seen this happen to a handful of the older guys I’ve worked with over the years. Often it seems to be the ones who do the most overtime; you’ve gotta have life/interest outside of work to keep you purposeful IMHO.

    “superannuation is bad”…Soilent Green is good.

  34. What John said.

  35. Yes, what ‘The Boss’ said Tom. The overtime can be a real killer because it often indicates that the person spends large amounts of time at work and can easily sacrifice things in life that they enjoy most for the sake of making more money – which is usually taxed highly anyway.

  36. “spends large amounts of time at work and can easily sacrifice things in life that they enjoy most for the sake of making more money – which is usually taxed highly anyway”

    Poignant. Work should be a means to an end. As you say, “they” tax the f@ck out of you anyway so you may as well live your life & not be a timewhore.

    We are not born to be economic-slaves.

    given…”just enough to get by, never enough to make it work”. LOG

  37. Thank you John, I’ll read your link later (I’m a bit tied up in preparing the Company BAS and trying to sort out my, the employee, and the Company PAYG tax for the O N Dec, period, see I have to do two lots, one for me and one for me(the Company), and there’s a 20% deduction for that period, for the Company but not for me, but as I’m no accountant, and me and the Company, me, can’t afford to pay one every five minutes, it gets a bit difficult and this results in lots of letters from the ATO,usually from Albury or Hobart, that confuse me and the Company ,me, even more.
    However it gets worse,
    So I can do all this paper work, I have to hire some help to actually make some money to pay Super and PAYG and GST, the problem is that I need say some chain saw work (needs an operators license), weed control (need a chemical certification certificate), machinery operator……you get the drift.. Oh, and a big sign on the gate that tell people to piss of so I won’t be sued.
    That,s why I have had enough. Small business, big joke.

  38. Lang Mack

    It is a big joke and quite frankly small business owners have been continually ignored. Yet, how may times do you hear politicians spruiking about the importance of small businesses to their communities and the economy – too often.

    It’s all lip service Mack.

  39. Nature 5, on February 25th, 2009 at 7:18 pm Said:

    The article in question comes from Kohler not Gittens.

    Lol Thanks Nature5, that’s more like it.

    What are your thoughts on what Kohler has to say ?- from what I can gather he’s got a sound reputation and his message is pretty strong.

    This is a major concern: “In many cases, geared hedge and private equity funds are now worthless because underlying asset values have fallen 50% behind a 60% gearing ratio. Many of these will only hit the super funds’ core fund valuations on 30 June this year, when the unlisted portfolios are valued and audited.”

    So much of what these funds carry in their portfolios lay hidden which is the real crime just waiting to explode in the face of unexpecting investors.

  40. And, whilst grabbing a bit of tucker before I get back into this taxation maze, on the 7.30 report, and repeated at the end, a Dept:of Immigration (DIC) suit say’s “Progressing Forward”. How much are we paying this goose?. I despair.

  41. John McPhilbin, on February 25th, 2009 at 7:46 pm Said

    “he’s got a sound reputation”

    In the last 24 months or so, he’s had more positions than the Karma Sutra. But he is not Robinson Crusoe in terms of this ‘flexibility’.

    As background ( because there seems to be some confusion). Most Super Funds have various ‘Investment Options’. Mine has 9 ranging from ‘Cash’ through ‘Cash Plus’, ‘Socially responsible’. ‘Balanced’ etc through to ‘High Growth’, ‘International Shares and ‘Australian Shares’.

    With an option like “Australian Shares’, the performance is pretty transparent because one can follow what’s happening by reference to the ASX (even if your fund is a day or two behind in its reporting. But with the Balanced Option ( the usual ‘default option’) there can be some surprises.

    The average Balanced Fund might have 30% in Australian Shares, 30% in International shares, 10% Cash and the rest in Alternatives such as property, private equity, hedge funds, infrastructure, commodities and the like. ( BTW, the percentages I refer to can vary on a daily basis and most certainly will vary depending on the judgement of the manager).

    How these ‘Alternatives’ are performing is not transparent in the way that the Australian Shares option is transparent. While the Super Fund might show Australian Shares down 30% for the year (which would be an accurate estimation of what’s happening), It might show that the Balanced Fund is only down 19%, (which is probably an optimistic view) because it is based on valuation of property, private equity, hedge funds etc that was true an the end of June last year.

    What Kohler is saying that when the ‘Alternatives’ are revalued, there will be some nasty surprises. the current negative 19% might go beyond the current 30% for Australian Shares.

    Kohler is advising people to jump ship from Balanced Funds to Options such as Listed Options such as Australian Shares or International Shares which are far more transparent.

    He’s probably got a point but as always the concern is when to jump. In my fund the Balanced Option (Kohler’s Defalut Option) is down 1.7% on average over the last 3 years while the International Shares Option is down more than 12% on average over the last three years.

    Disclaimer: this is not financial advice because over the last few years I have always zigged when I should have zagged. In my view no ‘expert’ has a clue where all this will end. Lol.

  42. Yes, retirement is bad; it kills those without non work related interests.

    Luckily, the big fall in the All Ords means that we will work forever! And live longer!

  43. Tom of Melbourne, on February 25th, 2009 at 8:40 pm Said:

    “And live longer!”

    I’ll drink to that. So many stories to relay. So many flies to flay. So many unions to slay. So many mistresses to lay.

    And after breakfast. A new day!

  44. Nature5

    “Disclaimer: this is not financial advice because over the last few years I have always zigged when I should have zagged. In my view no ‘expert’ has a clue where all this will end. Lol.”

    Amen to that. I think there’s one thing I’m sure of and that is the sheer unpredictability of this whole damned crisis. There’s quite a few areas where for years there had been no signs of letting up on the upside, and now we have a complete reversal in so many areas (i.e financials/banking, housing, retailing and markets overall simply because financing has been so tightly coupled and interwoven throughout)

    Cover thine arse is a good policy Nature5 haven’t we all zigged when when should have zagged and zagged when we should have zigged – I sometimes think that’s the story of my life (lol)

  45. Lang Mack, that’s why we make the sacrifice and employ an accountant whose fees probably equal the amount of super we could afford, but by the time we pay the accountant, there’s nothing left for super. And we feel really happy about that after reading the above.
    We’re a company which employs us as a partnership which employs the two of us, but isn’t obliged to pay super for us. We formed a company (on the accountant’s advice) one year when we actually made a decent profit, which was promptly snaffled by the ATO (provisional tax).

    So we ended up having to go cap in hand to the bank to borrow enough money to get us through the winter; our work is seasonal. We have kept the company which employs the partnership, which…… you get the picture.

    The upshot of it all is we’ll probably still be in this caper until we pop our clogs. The joys of self employment!

  46. John McPhilbin,

    Think of the bigger picture. Here in Australia, most of us (but certainly not all of us) have enough to eat and drink and it is extremely unlikely that or homes will be bombed tonight. Others are not so lucky.

    We should count our blessings occasionally (not that I am in any way religious).

    Imagine if one lived in Iraq, (to use but a recent example), and had their houses blown apart, their family decimated, forced to flee. and the like. The ups and downs of the share market would pale into insignificance surely.

    I vote for perspective. What about you?

  47. Nature5

    “Imagine if one lived in Iraq, (to use but a recent example), and had their houses blown apart, their family decimated, forced to flee. and the like. The ups and downs of the share market would pale into insignificance surely.”

    I’ve written long and hard on the Iraq conflict and Afghan conflict in the past Nature5, and your call for perspective is a sensible one. Thinking in terms of the sheer magnitude of suffering so many have to endure does make our economic woes pale in comparison.

    Geez Nature5 all this agreement is scary (wink)

  48. Nature 5 @ 9.06 – very amusing indeed.

    I agree with your comments about the benefits of living here. In some countries not only does everyone work for a pittance until they drop, some of the activities we take for granted are seriously frowned on.

    You know that over indulgence in alcohol is not well regarded in some cultures!!???

    Some cultures allow additional wives, but additional mistresses are somehow thought of as more than poor taste??!! Can you imagine if we had to marry all our mistresses? Chaos and agony is the only consequence I can imagine.

    I always think – what a crazy world it is outside Australia. It really gets the fall in the All Ords into perspective.

  49. Tom of Melbourne, on February 25th, 2009 at 11:14 pm Said:

    “You know that over indulgence in alcohol is not well regarded in some cultures!!???

    Only up to a point. (BTW, why is it necessary to use multiple punctuation marks?). In some cultures, particularly those under the influence of the Islamic religion, shun alcohol BUT only for the living. Tis one of the rewards of the afterlife along with all those virgins. Dream on Tom, dream on. Lol.

    Tom, now that I have your attention (for a moment at least or are you typing as you ‘do-it”) what thinks thou as to the controlling influence the unions have over Rudd

  50. Millionaires blasted for claiming pensions

    THE pension system is so badly organised that more than 50,000 people with disposable income of more than $60,000 receive the age pension and a further 14 per cent are paid the benefit despite their assets being worth $1.6 million.

    The Brotherhood of St Laurence, which commissioned research into the pension system, wants the Federal Government to include owner occupied homes in the means test for the pension to stop payments going to people who do not need them.

    I think you’ll find that an elderly person lives in a house that has increased in value over the years. The pensioner’s family don’t want the house sold because they see it as their inheritance.

    Isn’t it just greed?

  51. Kitty

    “I think you’ll find that an elderly person lives in a house that has increased in value over the years. The pensioner’s family don’t want the house sold because they see it as their inheritance.

    Isn’t it just greed?”

    Another example of how many pensioners are ill-treated.

  52. James

    I completely agree IMHO this is mischevious at the least and hystercial at the worst.

    I look forward to your response today.

    During the 1980s crash many average people fled shares and property investments to cash, on advice like this. if they had kept their cool they would have recovered all of their losses and now be multimillionaires even with the current stock market rout.

    Regarding unlisted and listed funds, my units held are updated at least once a week and some have fallen by over 60% already, so I assume that the majority of the correction is already factored in on many of those funds. That is unless management is hiding something.

    It doesn’t matter whether you hold direct shares or funds investment there will always be corrupt management and losses. This is another reason to diversify in my opinion.

  53. Yes kitty, it’s like the furore when the last government tried to introduce bonds for aged care. Lots of screams about poor old mum having to sell the ‘family home’ … which she couldn’t live in any longer, so why the fuss? Well because the kids were counting on selling it when she died to pay off their own mortgages, of course. God forbid they should have to do it out of their salaries.

    Needless to say Howard’s mob caved in as soon as they realised they’d upset their precious aspirational support base. Labor’s attitude was no better.

    As for Kohler – he’s a media star who’s been comprehensively wrong about a lot of things lately. I wouldn’t be starting a run on superannuation on his say so.

  54. Well N5, apologies for going to sleep last night.

    Who is controlling Rudd?

    I’d like to remain true to form and say – the unions.

    Rudd is in a strong political position, based on his personal popularity. This popularity waxes and wanes, and ALP politicians cannot rely on their personally earned authority indefinitely.

    At some point Rudd will be seen as just another politician, and will have to deal with the unsavoury characters that run the machinery of the party.

    The factional power brokers and union hacks will have their day!

  55. Regarding pensioners I have a problem with inclusion of the family home in any asset assessment of a pensioner.

    My mother lives in Coonabarabran and she built her own home for $8,000 pounds including land. It is now worth approx $200,000.

    One of my customers here on the sunny coast purchased their first home for $28,000 dollars and it is now worth $2,500,000.

    Both families are average workers, both families were told they would be looked after by the government when they turn 65.

    Both families lived in and raised their children in the one home for over 40 years. Both families never received family payment, or allowance or any other number of the massive benefits thrown at families these days.

    Both families lived in their home while working for over 40 years and dutifully paying taxes and abiding by the law.

    Both families moved to where they had a job and stability for their family.

    Neither family 40 years ago dreamed of what properties would be worth in 2008 or 2009. they simply needed a home for their family and both homes are modest 3 bedroom houses.

    To now penalise the pensioner on the sunshine coast would be disgraceful.

    My mother will leave our family home in a pine box and I understand the connection she has and the emotion and possible wish to end her life if she was forced to leave her home.

    Why on earth would we expect the pensioner on the sunshine coast to sell and abandon their family home simple because the value increased massively on purely a lifestyle decision by yuppies to dictate that close to the ocean is good but out west is bad.

  56. Tom M

    You really have a thing against unions don’t you.

    Having a blind ideology on any matter I find amazing when there is information at ones fingers tips from all sides of equations. It is not as though information is limited like it used to be many years ago.

    I praise and criticise all sides of politics and business after analysing information from many sources.

    Your blanket total criticism of all unions is the same as my saying all business managers are corrupt. Which is simply untrue.

    Did you respond to my comments regarding the influence of the NFF on the National Party ?

  57. Are they are both equal shane, the single pensioner in a $2.5 mill house and the single pensioner who also has to pay rent out of her meagre pension?

    Yet they can still get the same pension.

  58. Kitty. As per Shane’s mum, mine will leave her home in a pine box. She’s lived in this same house for 70 years as my grandfather bought the house in Hawthorn, a worker’s cottage in the late ’30’s when the kids came down to the city from the farm.

    Also, where would she move to? She hasn’t been able to drive for the past 4 years but is able to maintain her independence by being in walking distance to Woolies and can catch a tram when she feels like an outing.

  59. An addendum..very obviously rental assistance for pensioners who have to rent needs to be increased as a matter of urgency.

  60. Reverse mortgage options come to mind when someone is sitting on a house worth $2.5m, and getting the same pension as someone in a $200k cottage.

    No need to move out – get the kids to pay the interest on a reverse mortgage if it really isn’t all about a greedy inheritance!

  61. Taking in lodgers used to be the solution for people who were asset rich but income poor. Sure it would be unpalatable for many people but the alternative is to require the rest of the population to support someone who owns a house worth far more than many could ever afford. These days, that support might extend 25 or 30 years or even longer.

    I don’t pretend to have a pat formula to resolve the competing interests but it’s a bit more complex than “my mum and dad worked hard all their lives so leave them alone”. Quite apart from anything else, some moms and dads never did a stroke of useful work in their lives (and I don’t mean just politicians).

  62. shane
    …One of my customers here on the sunny coast purchased their first home for $28,000 dollars and it is now worth $2,500,000.
    Both families are average workers, both families were told they would be looked after by the government when they turn 65.
    Both families lived in and raised their children in the one home for over 40 years. Both families never received family payment, or allowance or any other number of the massive benefits thrown at families these days…

    Quite a difference between $200,000 and $2,500,000 shane.

    Isn’t it the same argument as the Aboriginal compensation one (not that I think it’s right BTW) – people of today can’t be penalised for the government’s actions of the past? Why do the young taxpayers who do not have that history or lived through that time period, have to pay for people who can easily support themselves, by today’s standards?

    min, very urgent IMO. I think your mum would be safe, unless her house is worth millions now – and if it is, shouldn’t she be using that wealth to support herself?

    They are not talking about every house owner, just the quite wealthy ones. From the article that I linked to above:

    …The age pension is there to support the most disadvantaged,” Ms Ballenden said.

    The Brotherhood will recommend to the Henry review into taxation that houses be treated in the same way as other forms of savings or assets.

    It suggests that people who own and live in houses worth more than $1 million should not be eligible for the pension.

    “You don’t want to force people to move [but] there are ways to draw down on the equity of your house,” Ms Ballenden said. “We have ignored this form of wealth and we need to recognise it as that…”

  63. shaneinqld & Min…good points just in last few comments (it’s a shame they aren’t numbered) . Tho I can understand Ken & kittylitter’s concerns. Has to be a compromise by government in their somewhere.

    And Lang Mack is right to be concerned about too much stifling govt. regulation on small business during this economic crisis.

    “Cover thine arse is a good policy Nature5 haven’t we all zigged when when should have zagged and zagged when we should have zigged”

    Valid comments per usual John. I’m hearing the Opposition & corporate media dump so much blame of late on Rudd’s team for layoffs and such…it is so much BS, typical of the ENABLERS of PROFITEERS & GAMBLERS & CON ARTISTS & WAR-MONGERS…

    it’s important that people understand their own debt accumulation has partially contributed to it…but the following is a MUST READ…the waves of this economic tsunami generally began elsewhere:

    David Fiderer
    Lawyer and journalist
    HUFFINGTON POST
    Posted February 20, 2009 | 08:41 AM (EST)
    Time Rewrote History With “25 People to Blame for the Financial Crisis”

    http://www.huffingtonpost.com/david-fiderer/emtimeem-rewrote-history_b_168503.html

    N’

  64. OK, bear with me here, because it’s a complex thing to explain.

    Firstly, as regards the assets that Kohler describes, I agree that I would generally prefer not to be invested in them.

    Secondly, I beg to differ as to what Kohler describes as “typical”. Following is a small range of funds that I would regard as “typical”, some retail, some industry. I think when Kohler talks about “typical” funds he is referring to “industry” funds. Tom will love this, as “industry” funds are “union” funds.

    In the “balanced” investment option of the following funds, the percentage allocated to the types of investments described by Kohler is as follows:

    MLC – 9%
    BT – 8%
    Colonial – 0%
    Perpetual – 0%
    AMP – 20% (13% of which is direct property where AMP is historically a pretty big player, so understandable).
    Hesta – 32%
    Australian Super – 32%
    CBUS – 30%+

    So if you have $100,000 in MLC Balanced, $9,000 would be in these markets. If you have $100,000 with Hesta, $32,000 would be exposed.

    Now I am not certain if Kohler’s predictions are right, but I am certain that for a “balanced” investor, I would have concerns about exposures greater than 5-10% to these kinds of markets. If what Kohler describes eventuates, the repercussions are massive.

    The usual disclaimers apply here. I am not telling anyone what they should do, and I have taken a small sample of what is an enormous industry. I am happy to outline anyone’s individual asset allocation offline (assuming Joni is happy to forward on emails) for nothing. Anything more and I’ll charge like a bank at an opposition’s ATM 🙂

    For the record, I am licensed through a company called Garvan which is owned by MLC.

  65. Thanks James for the feedback.

    “Now I am not certain if Kohler’s predictions are right, but I am certain that for a “balanced” investor, I would have concerns about exposures greater than 5-10% to these kinds of markets. If what Kohler describes eventuates, the repercussions are massive.”

    Scary stuff indeed!

  66. Taking in lodgers used to be the solution for people who were asset rich but income poor.

    Now there’s a solution ken, solves the problem of people not being able to afford private rent or even own their own home (yet their taxes supports wealthy home-owners).

    On the plus side, the pensioner has company, people to perform chores and do odd jobs around the house. Downside would be elderly abuse though, but I’ve read that it happens at the hands of the pensioner’s own family too.

  67. Kitty..in order for my mum (recently celebrated her 84th birthday) to have any ‘wealth’ she would have to sell her house and move to where?

    Her house is worth $s because it’s close to the city in a previous working class neighborhood. It’s certainly no where near $2.5M however the link from the SMH states: a further 14 per cent are paid the benefit despite their assets being worth $1.6 million.

    The front porch is on a lean and she recently had to come up with the $s to replace the ancient hot water service.

    And so, this could easily include pensioners with no other income who are living in homes in inner suburbs who through no fault of their own their only ‘asset’ their house, has increased subtantially in value over the last few years.

  68. No government would ever include the family home in the assets test because 1. it would be political suicide and 2. it would be administratively difficult.

    One of the less tasteful aspects of my job is when I have to advise quite well off retirees how to divest assets in order to “get the pension”. But the fact of it is, there is a school of thought out there that says “I have worked and paid my taxes, therefore I want my pension, and I don’t care if that leaves me less well off”.

  69. James,

    A purely hypothetical question (of course), if one is approaching retirement and has a primary dwelling in Australia, and offshore assets (property for example) in other countries, is the Australian govt likely to find out about those offshore assets, if they aren’t disclosed by the retiree during the process of appplying and subsequently receiving the aged pension?

  70. “Now there’s a solution ken, solves the problem of people not being able to afford private rent or even own their own home (yet their taxes supports wealthy home-owners).”

    I’ve been pointing that out for years.
    N’

  71. But the fact of it is, there is a school of thought out there that says “I have worked and paid my taxes, therefore I want my pension, and I don’t care if that leaves me less well off”.

    like I said at the beginning greed, either on the part of the pensioner or their ‘inheritees’ (aren’t they usually the beneficiaries of the ‘divestment of income’ so the wealthy can live off the taxpayer).

  72. kitty

    The point I was trying to make is that both families did not try and become wealthy from their own home. they simply built or bought where they could get a job at the time and raise their family.

    To expect one to sell and move as a result of a twist of fate in prorerty prices is cruel and thoughtless and completely selfish in my opinion of any person who has never owned a home, and I have never owned my own home.

    These families did not invest in a money making enterprise or expect to generate income or do something out of greed. It was simply their home where they have lived all their life.

    I agree rental assistance needs to be increased for pensioners renting, have stated that ever since blogocrats was created.

  73. Ken

    It is a solution however taking in lodges years ago was a far safer proposition than today. I would need to check very very carefully the background of anyone who lodged with my mother.

    Times have changed, respect for the law and the elderly is no longer a given.

  74. kitty

    I certainly am not greedy for my mothers estate and I don’t think the majority of children are. Yes there would be a few.

    I simply want my mother to be happy and live her life stress free. if she wants to sell then sell if she wants to stay then stay. if she wants to run around naked ( god forbid) in her own home, then she can do so.

    I do not want her forced to leave her home of over 40 years at the insistence of a government and I don’t care what party it is.

    It was not planned wealth, or wealth obtained by anoyone elses labour, It was incidential appreciation in the value of her home and is only wealth when the property is sold.

  75. You’d have to be mad! MAD! To consider taking in a ‘lodger’ in this day and age.

    You’d wake up to find the silverware gone and a pool of syringes in the bathroom.

  76. Lodgers & the home owners need to know their status & rights etc…here’s NSW:

    http://www.tenants.org.au/publish/factsheet-14-boarders-lodgers/index.php

    i imagine mortgage holders might need to notify their financial instiution too. And one needs to think about the tax aspect.

    N’

  77. Kittylitter at 12.46…..in short, no. Firstly, if a retiree offloads assets or income in order to get the pension, then they are worse off, so greed is not the motivating factor. More a sense of entitlement, which is quite different. In term of beneficiaries, only a relatively small amount can be “gifted” to friends or family in order to “divest assets” to get the pension, so greed would not come into it here either. In my experience, it is actually quite the opposite. The vast majority of children don’t give a stuff about inheritances, as long as their parents are comfortable. The vast majority of parents want to retain assets to leave to their children. So self deprivation is far more common than greed in my experience.

  78. Reb, of nowhere near Hobart, it would really depend on the lengths your hypothetical friend had gone to to hide the asset from the tax man in the first place. If the government knew about it before retirement, it would still know about it. That tax file number stores a lot of information.

  79. “You’d wake up to find the silverware gone and a pool of syringes in the bathroom.”

    You’ve watched too many America movies…:)

    reb, you could always take in a uni student…even one you could learn a new language from.

    N’

  80. On the issue of: But the fact of it is, there is a school of thought out there that says “I have worked and paid my taxes, therefore I want my pension..

    I think that somewhere along the line something changed and this is giving due regard to the fact that the majority of people in their 70’s and 80’s would have very little superannuation. Or if they did, then the value was very small. As my father used to say (and I’ve mentioned this before), I saved my sixpence and then when I retired I got my sixpence back. What is sixpence worth these days?

    The pension used to be a living wage for people who had worked and paid taxes all of their lives. These days of course it’s completely inadequate.

  81. N’ my granny actually used to take in boarders in the ’70’s. Two were lovely young girls but the 3rd boarder was a nightmare who ordered Nanny Lucas around and demanded meals made to order. My parents had to have words and it took the police to get him to leave my granny alone.

  82. Hmmm “a UNI student” you say.

    Maybe a nice young genteel Thai boy…?

  83. “You’d wake up to find the silverware gone and a pool of syringes in the bathroom.”

    Not only that, but most lodgers have atrocious table manners, they drink bundy and coke, they wear polyester.

    They’re not OUR kind of people.

  84. Tom, I fed you a line earlier….come on!! Don’t disappoint….

  85. Quite right Tom.

    AND they only go to the movies on budget Tuesday (half price), and take in their own pre-branged snacks!

  86. Can someone tell me how having the Freemasons over can help with income and why they might steal the silverware? And is it true they drink Bundy?

  87. “Maybe a nice young genteel Thai boy…?”

    reb, I was thinking more of a student who is also a P/T Sumo wrestler…the exercise routine would come in handy:

    N’

  88. James – ““industry” funds are “union” funds”

    Quite right James, thanks for the prompt. I’m not normally one to pass on the opportunity for a cheap shot.

    Some of these industry funds are just a front. I suppose they do save union members a bit in fees, because the union junkets these days are paid out of the funds.

    I love the list of the Board of Directors of some of these funds. Fiduciary giants, all of them.

  89. “but the 3rd boarder was a nightmare who ordered Nanny Lucas around and demanded meals made to order. My parents had to have words and it took the police to get him to leave my granny alone.”

    Yikes! Yea Min., there are plenty of FREAKS out there. Gotta be real careful when choosing a lodger/boarder. Might be handy to have a ‘panic room’…

    but I guess if you could build that you could pay the mortgage.
    🙂

    My Mum ended up marrying the lodger…he helped her & I escape from her alcoholic bully of an air-force hubby.

    Surprises come in every package. Your poor Gran got the nightmare in the box. We got a SAVIOUR.

    N’

  90. It’s not so much that, Tom, it’s the allocation of funds towards “alternative assets” that is the concern. A third of the billions of dollars invested in these industry funds are in assets that can’t be viewed by the average investor. What are those “unlisted investments”. The industry funds have been boasting in the media about outperforming the retail funds, is this because they haven’t valued their assets yet? I am ashamed that I wasn’t aware of this before I looked this morning. I steer away from industry funds because their insurance options are inadequate and inflexible. I had no idea about their investment allocation.

  91. N’ I still don’t think that 70 and 80 year old women should be obliged to have to take in boarders. Surely there has got to be a better way.

  92. Thank you Jim of nowhere near Melbourne.

    My hypothetical friend of nowhere near Hobart has not, at least as far as he’s told me, declared any expenses or other claims associated with his hypothetical offshore assets here in Australia, so I’m presuming that your response is indeed favourable if in fact such a hypothetical scenario were to exist, which naturally of course it certainly doesn’t.

    Ta!

  93. A bit late but on reb’s “You’d wake up to find the silverware gone and a pool of syringes in the bathroom”…. how would you know that you had a lodger?

  94. To the taxman, it’s a “he”, so that rules out 51% of the population. “He” is from nowhere near Hobart, so that rules out a further 20 or 30 people (depending on whether it’s a head count or a torso count). I’ve done enough, you can work out the rest.

  95. Leave the poor old buggers alone. As Min says, her mum is 84, has lived in her house for decades and wants to live out her life there the same as lots of other OAPs who most likely retired at least 20 years ago.

    They aren’t property speculators living in luxury. The buildings are probably pretty much the same as they were when they first bought them and worth little or nothing. It would be the good old 1/4 acre block it’s sitting on that’s worth all the money.

    And once again, Min’s on the money (or lack thereof) re superannuation. Most likely her parents wouldn’t have had access to super and like the majority of retirees their age, wouldn’t have earned enough to salt anything away for their old age.

    Even if they had a nest egg, by now they’d be lucky if it earned enough to pay the council rates, which no doubt are at least 10 or more times the amount they were when they moved into the house.

    They’re not rorting the system and their houses aren’t earning them a penny. They’d be costing them plenty, though.

  96. Thank you Jane. My late father worked for Hardie Trading for over 40 years and had a little super, my mother worked for an accountancy firm from prior to WW2 and had none.

    Can you imagine it. Tossing the oldies out of their homes just because their houses are now worth squillions because they are inner suburbs.

    And so where would one toss them to?

  97. Er, just cause I’m curious ;), an Industry fund called CBUS , Tom of Melb: um err….. I think I’ll have a beer..
    Nask,
    My Mum and etc; good for you both mate, but sad at the same time.. L

  98. ” I still don’t think that 70 and 80 year old women should be obliged to have to take in boarders. Surely there has got to be a better way.”

    I agree Min.

    Just to be clear, I’m talking about boarders/lodgers for people about reb & joni’s age…:) I’m in agreement over not penalising those like my parents-in-law who I mentioned in a thread last week.
    N’

  99. This thread did get a wee bit mixed didn’t it N’. And from Shane: shaneinqld, on February 26th, 2009 at 12:55 pm Said:
    Ken

    It is a solution however taking in lodges years ago was a far safer proposition than today. I would need to check very very carefully the background of anyone who lodged with my mother.

    Times have changed, respect for the law and the elderly is no longer a given.

  100. “My Mum and etc; good for you both mate, but sad at the same time.. L”

    Cheers LM.

    Hope things work out for you on the farm.

    Any songs to recommend for the cocktail party on the other thread? You’ve got some goodies up yer sleeve & in yer noggin. RESPECT.

    N’

  101. I’m also quite comfortable with exempting the family home from the means test.

    Could one of the proponents of including the family home in the means test explain how it would work in the following circumstances, faced by most of us at some point of our lives.

    Presumably the value would be split when a couple are married and both living in it, and thus both qualify for a pension. When one dies and the house is fully owned by the surviving spouse, they would have to sell, reverse mortgage, etc the home that they shared with the deceased?

    I’d be interested to know which part of the public service would enforce outcome. I’d suggest that it would have to be the riot squad.

  102. Jane, your previous comment cheered me up a bit, brothers? in arms.
    I spent last night and most of today working out the ‘obligations’, then hit BPay twice for the ATO, I still have an accountant to pay, for the important stuff. Bloody hell.
    And you are correct, people of a certain age and a lot of Rural workers did not have any sort of super and the house /property took all income just to get the thing paid for, that ruled out insurance, super, shares and etc;.it should be remembered that some of us have been working for over fifty years and fifty years ago things were vastly different , things like food and children got in the way of the future. (When smoking was normal 😦 ).

  103. “Times have changed, respect for the law and the elderly is no longer a given.”

    True.

    And this kinda stuff doesn’t help. I bloody well knew that someone in the corporate media would capitalise on the shift to taking in boarders again…swines:

    The Lodger (2008) (Trailer)

    There was another film called the same:

    The Lodger is a 1944 horror film about Jack the Ripper. It was based on the novel of the same name by Marie Belloc Lowndes and starred Merle Oberon and Laird Cregar.
    (Wikipedia)

    Gawd, imagine having a lodger & they come home w/ these on DVD & ask you to watch them w/ them…

    😦

    N’

  104. Hey LM, this might go down well w/ the beer:

    Gordon Lightfoot 1974 – Sundown

    N’

  105. N,” Tribute to Gordon Lightfoot” Maldaur, Cockburn,Sexsmith, Winchester and etc’.
    I’ll send you a PM so you may enjoy it. Class CD.

  106. These are the types of pensioners that would be affected, those with independent means of income, I really don’t have a problem with it. In fact, I wonder why they have been allowed to get it in the first place.

    Wealthy pensioners to lose out:

    About 1 million people, most of whom receive only a part pension, would be affected.

    They are likely to be comparatively wealthy and own their homes outright and have other sources of income…

    …”A single person can get some of the pension and a range of other concessions when their income is about $770 a week… “

  107. Thank you for the clarification Kitty. Phew, I was visualising all these oldies such as my mum and Shane’s mum out on the street!

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