The Parliamentary Budget Office (PBO) provides transparency around fiscal and budget policy to all parliamentarians. On the 30th September they released a Paper regarding the Jobseeker payment previously known as the dole, unemployment benefits and Newstart. They made the observation that “Jobseeker appears to be functioning as a kind of pre-age pension payment for some older Australians.”
Really? This isn’t anything new. It has been going on for decades. The only difference now is that more people are doing it. In fact a third of all recipients over age 55 have relied on the benefit for more than 5 years, well before the impact of COVID. This has been assisted by the fact that this group is exempt from searching for jobs if they have completed some paid or voluntary work.
An increasing burden for Australian taxpayers is that there are far to many people retiring too early with too little. As they age they will becoming increasingly reliant upon health services and aged care predominately funded by the public purse. With an aging population this is a ticking time bomb.
The brutal reality is that the average person finds it difficult to save voluntarily. Many overcome this by buying a home and paying it off over many years but disturbingly there is an increase in people retiring today still owing money. The only way many people save is through their employer sponsored super guarantee (SG) currently at 9.5% of an employee’s ordinary times earnings. The SG is due to increase to 10% on 1st July 2021 and then continue to increase until it reaches 12% on 1st July 2025.
Despite the findings of the PBO we still have self-interested, bedwetting politicians seeking to defer increases in the SG in lieu of pay rises because it is politically more palatable. Given the key beneficiaries of the recent superannuation lump sum access scheme were JB Hi Fi and Harvey Norman I am not sure this is a great idea. There is an argument that there are excessive fees in the superannuation industry to which I agree. I have seen terrible advice with numerous parties all slurping from the unsuspecting client’s investment pool. These can include a platform fee, fund manager fees and a Financial Planner fee generally being 1% of Funds Under Management for doing very little. Additionally, younger investors have far too much exposure to fixed interest assets which will never keep up with inflation.
Governments need to show leadership in standing by the compulsory SG increases as legislated both for the sake of the older generations and those coming through who will need to pick up the bill. Additionally individuals need to review their superannuation funds to determine the level of fees, their asset allocation and to ensure that they have appropriate insurance for their current needs. These simple steps have the capacity to add significant wealth to peoples financial position when they reach retirement age, which in turn provides the opportunity to achieve their desired lifestyle.