Retirement Income must be certain
The retirement income needs to be certain so that retired people and people approaching retirement know how to budget their funds for the years ahead so as not to be places in a destitute situation in the senior years! The issue is how reliable are current plans to deliver that certainty?
The Australian reported a move to consider the use of the future fund to put real certainty of the retirement income as there is insufficient certainty via the current arrangements through the Superannuation Funds in the light of the Royal Commission into the banking and Financial Markets.
The problem with this proposal is clear as historically the governments have failed to use funds collected for a special purpose exclusively for that purpose for which it was collected. It seems to me we should have protection from the future decisions of future governments that will draw down on funds for alternative purposes than that which they were collected. The only way I can see such a protection is via a Constitutional protected account that is managed by an Auditor General’s Office that is independent of the political process since the government of the day seems to spend what they can if they find it within their hearts desire. It is my desire to see this come to pass – that is the protection of special accounts under our constitution with the Auditor General’s Office protecting the account from government pilfering.
The certainty of retirement income arrangements since the Commonwealth introduced the Commonwealth pension in 1909 has had a long and varied road with some huge hits along the way. Originally the States collected the income tax and hence they contributed 2.5% of the income of all Australians into this new fund and when a man would retire at 65, and a woman at 60, they were to received 2/3s of the basic wage as their pension for life. This arrangement continued until the Commonwealth Government took over all the income taxing rights of all Australians. The retirement taxes were deemed to be separate to the rest of the government’s accounts but the lines were to become blurred and with the demonizing of wealthy people getting a pension in the late 1960’s and the changes to pension payments in 1972 under the Labor Government the certainty of retirement became less certain until the Compulsory Superannuation policies of Paul Keating were made law. This policy was to deliver certainty for all in retirement. The financial markets leaped to get their hands on this money and the trade unions as well embarked on this new area of activity. The various treasurers have let the financial markets to very much regulate them selves and a weak and ineffective watchdog was set up to have oversight to it all.
During 1984 -1986 I discovered that there were some real concerns in the finance industries as commission sales people were doing very dodgy things – like producing false policies and paying of premiums for the commission qualifying period and making a lot of money. These dodgy practices were having actuaries recommend larger premiums to keep profitability on course for the businesses. I then called on an inquiry as the evidence I could see from the outside showed problems and the watchdog was either diverted from the problems or asleep on the job. My call fell on deaf ears, however just over 30 years later we now have and Royal Commission into the financial sector and is it discovering issues that must be addressed.