Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Seniors can raise a glass (or two) to an ‘election’ Budget
Senior Australians might not have been cracking open a bottle of Dom Pérignon after Tuesday night’s federal Budget – but a Yarra Valley Chandon Club Cuvée might have been taken off the ice.
For those still in the workforce but advancing towards retirement, there was an average tax cut of about $500 a year. When coupled with the $150 energy subsidy over six months, expanded GP bulk billing and cheaper medicines (the latter will not be means-tested), they are hip-pocket measures providing practical relief for many older Australians.
In a Budget address that had “election” written all over it, Treasurer Jim Chalmers gave a fair impression of Santa Claus – and voting seniors had obviously been furiously writing to him.
An advocacy organisation for older people, COTA (Council on the Ageing) Australia, said the Budget recognised that they were really “feeling the pinch” from the cost-of-living crisis and the government had taken steps to alleviate some of that pressure.
COTA’s chief executive officer Patricia Sparrow said: “There are some crucial measures in this Budget that will make a tangible difference to the lives of many older Australians, including the energy subsidy, tax cut for people over 50 and health reforms.”
But she added that the Federal Government needed to publicly confirm its intentions on freezing pensioner deeming at 0.25 per cent and 2.25 per cent beyond June 30, 2025.
Deeming rates are used by government to estimate the amount of income pensioners earn from financial assets and can reduce a pension amount.
“Continuing to freeze deeming rates at current levels would go some way to meeting the increased cost-of-living pressures faced by people on lower and fixed incomes such as those on the age pension,” she said.
Deeming rates were put on hold in 2022 at 2.25 per cent (for amounts of $62,600 and above) when interest rates started rising, the assumption being pensioners were earning less from their investments. Modelling by National Seniors Australia (NSA) found the average single pensioner was about $3,300 better-off because of the freeze.
The Budget measures also got the tick of approval from the NSA with chief executive officer Chris Grice saying they delivered, with higher bulk-billing rates, more affordable medicines, energy bill relief and, hopefully, a freeze on age pension deeming rates.
“While there was a strong focus on aspects of the public health system, we’re disappointed there was no funding to establish a Productivity Commission inquiry to address rising premiums and out-of-pocket health costs in the private health system,” he said.
“We’re also concerned there is no explicit reference to a continuation of a freeze on deeming rates in the Budget. If the freeze is lifted, part-pensioners will see a cut to their pension payment. We continue to call for this and a reset of the method used to calculate future rates.”
On a different note, the Older Persons Advocacy Network (OPAN) expressed concern that the Budget lacked adequate funding for the aged care sector.
OPAN chief executive officer Craig Gear acknowledged the $291 million in the Budget to continue delivering the recommendations from the Royal Commission into Aged Care Quality and Safety but reiterated that older people still waited too long for home-care packages.
“Our aged care sector is facing many challenges right now, including significant workforce shortages and a growing number of older people waiting for support. We would have liked to see increased access to hardship provisions for older people who have limited financial means to make sure they don’t slip below the poverty line.”
For well-heeled self-funded retirees, the biggest story in the Budget was what was omitted – any mention of the government’s proposal to increase the tax on earnings on superannuation balance exceeding $3 million.
It’s a clear indication the government intends to take this tax measure to the election – it failed to get it passed in the Senate in the last Parliament – without addressing industry concerns, particularly as they relate to taxing unrealised capital gains.
SMSF Association chief executive officer Peter Burgess said: “As a revenue item, the Budget was the last opportunity for the government to either take this ill-conceived tax off the table or make changes to address the significant issues raised by industry and the Parliament. Clearly, the government is now committed to taking this tax to the next election, warts and all.”
