Comment
More important than ever to do the retirement sums
Brian Shakes
I want to make it clear at the outset that I’m not giving financial advice – personally, or on behalf of the Over 50s Association. But I do want to alert people planning for retirement or embarking on the use of their superannuation to take careful note of changes the Federal Government is making in September.
The Government’s proposed Market Linked Income Streams (MLIS) legislation, whilst on the surface bringing financial advantages to potential retirees through broadening the range of income streams that can be counted as complying tax streams for Age Pension assets test assessment, has been linked with changes to the assets test.
The proposal is for a 50 percent reduction in the assets test exemption rate for complying retirement income streams. This will mean many of those who have saved diligently and built up some assets ahead of their retirement, anticipating they can also receive an Age Pension, will find themselves having to be self-reliant.
I suspect this won’t affect the very well off too much, but, should it become law, then many middle level people will be affected, and affected quite significantly.
The introduction of complying Market Linked Income Streams (MLIS) changes is welcome, as the current complying income streams definition is out of touch with today’s market reality.
Some would agree with the Government that the full assets test exemption introduced some time ago to further encourage the use of long-term income streams into retirement, rather than the quick spending of lump sums, is generous. It is also capable of being ‘abused’ so that some people may secure greater Age Pension entitlements than one might think are justified by the level of their assets.
Nor is there any doubt that the costs of the Age Pension system are likely to continue to rise in the years to come.
But we as an organisation would hate to see our members, and potential members, who largely fall into the group likely to be most affected by these changes, disadvantaged at all.
Possible increases in long term investment returns through a share-based investment strategy in an MLIS are not likely to compensate people for a loss of Age Pension entitlements, and MLIS will represent a riskier retirement income strategy.
By the time you’re reading this, the time for comments to the Government will have closed. But it will be interesting to see what the Opposition parties make of these changes, and how the Senate in particular is likely to deal with them, as the changes go through our Parliamentary system.
On an unrelated subject, I would like to say that ARPA Over 50s Association agrees with the Victorian State Government’s changes to drivers’ licences for older drivers.
It is entirely reasonable for drivers 75 and over to have to renew their licences every three years rather than 10, as long as this is not the thin edge of the wedge! There are plenty of drivers these days aged 75 and over who are in good health, and are competent and careful drivers. Many tailor their driving to shorter distances and known safe routes.
The licence is important for quality of life. Shorten the licence period by all means – but don’t take away the right to drive unless and until there is fair and reasonable cause to do so.
• Brian Shakes is managing director of ARPA Over 50s Association.
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