Dear Senator Richard Di Natale,

This is from your email.

Click here for the facts about our pension agreement (and a myth buster to help you respond to common misinformation):  

And this: It is frankly irresponsible to spread misinformation and fear about people's’ retirement. That’s why it’s so important we counter the rumours and claims being made about our agreement.

I’m sorry but you are the ones spreading misinformation.

Reversing Howard’s 2007 decision means better targeting the pension, you say.

So, “Reversing Howard’s 2007 decision” as you see it, is your duty.

There’s an old proverb ‘the road to hell is paved with good intentions. Well, as well as intentions, it’s possible to have good laws but the wrong application.

And as George Bernard Shaw said ‘When a stupid man is doing something he is ashamed of, he always declares that it is his duty’.

Do you realize that 10 years will have gone by from the time the Howard government introduced the legislation to the time when it will be reversed? Have you ever heard of inflation? In 1970 around $20,000 was considered to be enough money to retire on. The National minimum wage was $40.00per week, a dollar-an-hour. By 1980 it had trebled and it has trebled and trebled again. And it will continue to double and even treble. That’s how inflation works.

I don’t see you volunteering to reverse any politicians’ pay-packet or perks that might have been accrued over the past ten years although the salaries and entitlements paid to Australian politicians are among the most generous in the world. The pay is so good, especially for those in the top echelons that it pays better than in the US, Europe or many Asian countries.

I don’t hear anyone attempting to made CEO’s pay sustainable or highly paid Canberra public servants being wound back. Or super tax breaks that flow disproportionately to high earners being rolled back or removing tax loopholes that allow the rich to pay little or no tax. (‘Tax office statistics reveal the 55 millionaires who paid no tax', Sydney Morning Herald, 30 April 2015.)

In fact I don’t hear of anyone that is wealthy being ‘reversed’ in any way. When you analyse it the pensioners are the only ones who are being put into reverse. If Canberra had its way we know where they would disappear to.

The Federal government in the form of Mr. Hockey said the age of entitlement is over. Is that only for the needy, the poor and pensioners?

You say ‘The truth is, 171,500 pensioners will be better off because of this change to the pension system, and 50,000 more people will now get a full pension. Those with fewer assets who benefit from this scheme will be $30 a fortnight better off.’

Get your facts before you start pontificating. Few if anyone will be better off under these changes; many will be much worse off.

You have been quoting the government’s figures but they are wrong, wrong, wrong and wrong.

It is incumbent on you and your party to check these figures before you offer silly platitudes about making ‘pensions sustainable’. If you exchange ‘sustainable’ for ‘inadequate’ you would be on the mark. Under the changes to the assets test all retirees with lump sums over the current lowest threshold will lose what for them are very significant amounts of money.

Did you find the word ‘deemed’ in any of the government’s tables? Did you look at the changes to see the taper rate?

(Deemed income is income that is based on a rate of return that’s assumed for an investment even when that rate isn’t what the investment actually returns.

You must satisfy both an income test and an assets test to become an Age Pensioner, and the test that gives you the lowest amount of Age Pension is the test that prevails.)

The change to the taper rates means that instead of the current fortnightly reduction of $1.50 for every $1,000 of assets over the asset-free threshold the pension rate will reduce by $3 a fortnight for every $1,000 of assets over the asset-free threshold. E.g. if you have $300,000 over that limit ($733,000) you would lose $90 a fortnight or approximately $2,300 p.a.

As the Combined Pensioners & Superannuants Association has said, raising the lowest asset thresholds from $286,500 to $375,000 for home-owning retiree couples will not allow more people to access a full pension, as the Government has asserted, because the deemed income test will exclude them. Assets of $375,000 are deemed to return an income of $11,002.50 p.a. whereas the maximum income allowed for the receipt of a full pension is $7,384.00 p.a.

This means that a couple with assets of $375,000.00 would receive $3015.45 less than the full pension. Similarly the pension received by those with assets of $400,000 will be $1461.75 less than stated for $400,000 assets if these assets are liquid. Scott Morrison on behalf of the Government is falsely putting a positive spin on the figures. So far no one in politics has challenged him on this.

You have dismissed these figures and selected the Government marketing figures.

‘A better targeted pension system means directing support to those who need it most’, you say. So logically that support should come from those who need it least; but that isn’t where it’s coming from. The so-called ‘pensioner millionaires’ were not getting the pension anyway despite the assertions of the government; plus there are so few of them it really would make no difference anyhow.

The ‘support’ you talk about is being directed from those who also need it most.

Tony Abbott clearly stated before the last election that there would be no cuts to pensions and superannuation. This is an egregious breech of that promise and you are happy to support it. He is completely changing the rules for the superannuation of current retirees.

When Abbott also promised that the government would make no adverse changes to superannuation that was only the superannuation lurks for the rich because one of the first changes the government made was to remove the Low Income Superannuation Contribution scheme, under which lowly paid workers had their super contributions modestly supplemented by up to $500 a year.

You obviously think promises to the Australian people do not matter and are there to be broken. You have no mandate from anyone to do this. However, there was a strong mandate to not do it.

Is it any wonder that contempt has been begotten for the representative institutions of government? This abrogation of your responsibility to hold The Government to its promises is beneath contempt. Words cannot say how nauseated I am to hear that the Greens have done a deal with the devil. This decision, unless you make amends, will see your party on the same trajectory as the Democrats.

The cuts to retirees’ incomes follow months of demonizing retirees in the media and the playing of unprecedented wedge politics designed to pit the young against the old and retirees with few assets against so called ‘wealthy retirees’. This has been done by groups who represent the Government, Special Interest Groups who do not want to pay tax, and people who seem unable to understand that a lump sum is not a nice little nest egg but the absolute amount of money people have to live on for the rest of their lives. They talk as if retirees somehow have a regular income from other sources or perhaps they can live on the wind and their assets are just there to be used on luxuries such as caravans and cruises and kicking up their heels in general.

Many lump sums are not adequate at the outset but even those that appear to be are quickly eroded by inflation and the vagaries of the market. At the start of the Global Financial Crisis people whose lump sums were still in Super funds lost 30% to 50% of their capital. If this balance was not touched since then it would still not have returned to pre GFC levels. People who transferred their savings into safer fixed interest accounts have the lowest return on their savings ever; so that the so-called wealthy retirees with assets of $1,000,000 do not have a return that would equal the pension.

(Business Insider's Myles Udland posted a chart, drawn from research by the Bank of England, showing that interest rates are the lowest they have been for the past 3,000 years or in other words the lowest they have ever been.)

These so called ‘wealthy retiree couples’ with assets of $1,000,000’ were demonized daily in the lead up to the Budget as an example of retirees receiving benefits they do not need. The term ‘millionaire pensioners’ was constantly used in the media.

But the term millionaire belongs to a bygone era; an era none of us lived in; the early nineteen hundreds in fact. One would need to have more than a hundred million dollars to have the same impact on the economy today.

In 1901, the average weekly wage for an adult male in Australia was about $4.35 for a working week of almost 50 hours. The average weekly rent for a three bedroom house in 1901 was $1.30. Those were the days to be a ‘millionaire’.

And the billion dollar savings will not be made from the so-called millionaires either. In the governments’ table of ‘Single home-owner’ the number of pensioners with assessable assets in the range $800,000 and above, there is the grand total of 3. In all other cases it is divided between two people and even then the number is small. You can’t combine people to make them into a ‘millionaire’. In fact the savings from so-called millionaires wouldn’t pay a politicians expense account.

Most of the savings will be made from people who have a lot less than a million dollars and who have never seen and will never see a million dollars.

There was this implication that ‘pensioner millionaires’ were somehow ‘rorting the system’. The people making these assertions failed to state that the million dollars actually represents $500,000 per person and that this money is meant to last people for the rest of their lives and combat inflation.

Then there was the scaremongering about the elderly living way too long in the future and probably in the present. One hundred years, even one-hundred-and-fifty years, was feverishly and frequently mentioned by our esteemed treasurer.

However, most of the gains in average life span are due to the reduction in infant mortality and those people live normal lives and pay their taxes. They don’t just arrive at pension age to be a burden on society in general and a particular burden on Joe Hockey. Using these figures is similar to taking a set of twins and saying that statistically if one twin died at birth and the other lived to be 100 then their average age at death was 50. That’s not telling the story of either of them. That’s what statistics are good at; not telling the story.

That’s why politicians love them. That’s what politicians are good at too; not telling the story.

And to be further disingenuous the department of social security uses life expectancy estimates up to 11 years lower than those used in the government's intergenerational report. The effect of the departments’ choice is to make it look as if the assets of retirees, who miss out on the pension, will last for a bigger percentage of their life than they actually will.

So the government’s intergenerational report makes it look like pensioners are living too long and will be a burden on the government while the social security statistics make it look like pensioners will not live long enough to spend their excessive funds. Living too long but not long enough to spend their largesse is the key problem with the elderly here.

The government, in selling the pension changes, also assumes rates of return on assets well above those used by other agencies and points to the gain in the share market index of 12.7 per cent in the past year without acknowledging that if a person had retired and taken a defined benefit payout in 2007 when the market was 6800 points and then lost a big percentage of their payout, when it crashed to 3,400, they would still not have recovered that money. That is nearly ten years with no income at all from the share market.

Those gains of last year have been totally erased this year. It’s no use averaging it over 100 years either and telling people how well off they are. Only in Joe Hockey’s parallel world will people live to be 150 years old.

But naturally the government cherry-picked the most suitable figures for their propaganda like a gambler choosing which horses to back after the race has been run.

In the current market the return on a million dollars is below what people receive on a full pension and the amount of pension received at this level is non-existent.

Citing an income for a couple of approximately $30,000 a year, the current return on $1,000,000, as the criterion of what ‘wealthy’ means in Australia creates a whole new definition of the word. For other benefits such as child care subsidies wealthy is identified as an income of $150,000. It seems no level of poverty is low enough for retirees.

According to most reports, to live comfortably today, a couple needs around $60,000 per annum and $42,000 for a single person. In the future it will be a lot more.

This is the kernel of the matter.

The budget changes are not just unfair but they will have the direct opposite to the desired effect: Because this is more voodoo economics behind the pension changes. This is more of the Malevolent Buffoonery we have come to expect from the government. They have once again aspired to mediocrity; they have once again fallen short.

This is an unprovoked slight on the generation that went to work at the age of sixteen and paid for the aged pension for the older generation. They went to work in the mines the mills and factories and in the fields and the building sites for the good of us all. They built the roads the bridges the dams and ran the mines for the future generations to enjoy. Yes, there were factories in those days.

And no there was no free university for this, the post war generation that are now retired. That came for the Hockey and Abbott generation. The current retired generation not only paid for the aged pension of the generations before them but they paid for their own education if they went to university and they also paid for the education of a younger generation for longer than was ever experienced before and longer than anyone thought possible and then along the way they were expected to provide for their own retirement as well. Also, throughout their working lives they paid for retired politicians entitlement i.e. pensions and benefits plus their generous super scheme. No other generation was expected to do that.

The next generation will have the benefit of superannuation for their entire working lives.

The so-called ‘intergenerational theft’ has been visited on this generation of retirees and not on posterity as is the claim. This is the generation that did so much and invented so much and are leaving so much. If it’s possible to steal from one generation (which it isn’t) then the future generation would be the ones stealing from the current generation of retirees. All the luxuries that they enjoy were made possible by the sweat of this generation of retirees. All the expensive houses that they can’t afford now will be theirs one day too. No generation has ever managed to take their homes or wealth with them.

They laid the foundations of this great nation under the toughest of circumstances. They overcame the shame of the past and won admiration by their commitment and ability to rise above adversity. That resilience and hardworking spirit is evident in their stoic approach to all challenges even the disparagement by the current government.

The pensioners of today borrowed money at between 10 and 20% all their working lives. They paid off their houses, their cars, their business loans, their personal loans at this high rate. On the up side, they witnessed their parents getting as much as 18% return on bank deposits during their retirement. It seemed easy enough to prepare for retirement. Just work hard, live frugally, save for the future and everything will be fine in the end. That’s what they believed because that’s what they were led to believe.

Now that they depend on their savings, for what they thought would be a comfortable retirement, they are getting 2% return on their hard earned ‘nest egg’. So basically for the last seven years the Australian stock market has never really looked like heading towards the high of 2007.

And no, this is not about leaving a ‘nest egg’ for the grandchildren either as has been suggested.

The harsh reality is their so called ‘nest egg’ will not produce any chickens once the eggs are gone.

The comparison of superannuation is similar to a water tank that can be used to sprinkle the lawn when there is no rain. (Rain in this instance means a flow of money after work income has stopped.)

However, this particular (money) water ‘tank’ has unique properties. If it has a reasonable amount of water in the tank it continues to top itself up. But as the water gets lower it has no further ability to top itself up. And when it’s empty, it’s empty forever. When it’s gone it’s gone.

By forcing people to use their capital in a time when there is virtually no return may slightly help the budget bottom line in the very short term. However, in the long term, there can be only two possible outcomes. The first is that people will spend (judiciously squander in some cases) the money (waste it on their family home most likely, because they can’t own a business, so it will have no real benefit to the economy or they will spend down the money in some way until they reach the desired pension level) to get into the most suitable pension bracket. The second option is that, without financial advice, they will try to support themselves using their lump sum to supplement the little income it produces until it’s gone. And it will be gone.

Inflation, remember inflation? It will help to get rid of it for them.

Either way they will end up on the government funded pension permanently because, when it’s gone it’s gone. So instead of saving taxpayers money into the future; eventually, in the longer term everybody will be dependent on taxpayer funded pensions in the years to come. (A simple answer would be to tax the money after they are gone. A death tax doesn’t sound nice so maybe a ‘passing over’ tax would do; Passing-Over Pension Sustainability Tax; a POPS Tax.)

Currently interest rates are extraordinarily low, to supposedly stimulate the economy because the Reserve Bank only has a hammer at its disposal, so it wants to hit something. When it realizes everything has been hit and there are no more nails sticking up, interest rates will rise to where they would be naturally.

When that time comes and interest rates rise again, and they will, there will be no water in the tank because when it’s gone it’s gone.

These changes will be a disaster for pensioners and taxpayers alike.

This is an ungracious task I find myself forced to undertake. On my side, in this debate, I find myself the beggar, the mendicant. Yours is the privilege, dear to the enlightened modern heart, of utterly kind looking sentences. It comes easy to you (for all the prevailing cants are with you) to assume for yourself the credit of benevolence, and philanthropy, and enlightenment, and ‘progress’, and all the rest of it; while I can be classed as the ungrateful servant permanently unappeasable.

So why are we not hearing more about the changes? Why are they not being analysed?

Well, career politicians will never have to worry about the pension. Working journalists are not drawing the pension. Many are young and naive and not thinking that far ahead. The older ones are like politicians, too comfortable to care. Every two-bit radio announcer and television presenter and minor celebrity is on a million dollar contract; CEO’s multiple millions even tens of millions. The so-called millionaires are also unaffected because at those levels, the pension paid was minuscule or non-existent.

So it’s left to ordinary people who have no voice because most ordinary people are too busy trying to make a living to think that far ahead. They just expect an honest deal from the government of the day.

Also, the changes are not immediate, which is a deliberate ploy so that they could be passed in Parliament before they are fully understood.

An age pensioner couple with $750,000 of assessable assets (not just cash or shares) should currently be receiving $602 a fortnight pension. Under the new rules, this would drop by $430 a fortnight, or $11,180 a year. That’s going to be a big impact on their budget.

On top of all that the figures are very difficult to understand. Too difficult for most it seems.

The focus at the moment is on dual citizenship, the ‘death cult’ and same sex marriage.

The government’s financial system inquiry, headed by David Murray found the existing tax concessions were “poorly targeted”. They overwhelmingly benefited the well-off, with almost 60 per cent of the tax breaks going to the top 20 per cent of income earners, and about 37 per cent going to the top 10 per cent.

The cost to the government of the tax breaks on superannuation, which will support the well-off in their retirement, is now almost equal to the cost of the pension, and is growing much faster.

But the government has ruled out addressing this, just as he has ruled out any action to address other obvious flaws in the system, such as excessively generous capital gains tax and negative gearing provisions.

If you are a pensioner now or in the near future regardless of your sex or sexual preference you will get a lot more unhappiness and anxiety from the changes to your pension.

It is a greater threat to our future happiness and prosperity than these side issues will ever be.

Now it has turned into a concerted campaign of lies and scaremongering about the elderly living way too long in the future and probably in the present. Therefore their pensions should be removed or reduced. There are many countries that pay the aged pension to everyone. Our nearest neighbour NZ does. Australia once did too. The aged pension was even available to ex-Prime Ministers on top of all the other perks. Billy McMahon got some bad press for picking up the aged pension when it was not means tested.

The pension means test has undergone several significant changes since 1970. It was abolished for pensioners aged 75 and over in 1973 and for pensioners aged 70 and over in 1975. The means test was replaced by an income test in 1976. An assets test on pensions was introduced in 1985. It operates alongside the income test.

On ABC's Insiders on 25 October 2015, Assistant Treasurer Kelly O'Dwyer suggested that the "whole objective behind the superannuation system" is for people to be able to live on their superannuation savings without recourse to the age pension.

Ms O'Dwyer said: "When it was set up all those years ago in 1993, it was set up to be an alternative to the age pension so that people didn't have to rely upon the aged pension or even the part pension."

That is not the case.

To begin with it wasn’t ‘set up all those years ago in 1993’. When Bob Hawke's government came to power in 1983, up to half of employees, mostly professional workers had some form of super. Hundreds of small superannuation schemes existed up to 1992 (not 1993) but were available to only about 50 per cent of the working population, usually Government employees and employees of large Corporations.

(Australia’s superannuation schemes were founded in the nineteenth century through deals done with employers by the Labor movement and pre-date the age pension, which only became available after federation, and aimed at making as many people as possible out of destitution in retirement.

The universal compulsory superannuation introduced by Labor in 1992 had a mandatory 3% contribution rate. This was never going to do more than provide a small retirement sum for anyone who did not have other superannuation but it was the beginning of the system we have today which is still inadequate. Unfortunately many employers modified existing schemes to a version of this new scheme which reduce contributions by employers and employees and provide reduced retirement benefits.)

And to be further disingenuous the department of social security uses life expectancy estimates up to 11 years lower than those used in the government's intergenerational report. The effect of the departments’ choice is to make it look as if the assets of retirees, who miss out on the pension, will last for a big percentage of what’s left of their lives.

However, the government’s intergenerational report makes it look like pensioners are living too long and will be a burden on the tax-payers, while the social security statistics make it look like pensioners will not live long enough to spend their excessive resources. Living too long but not long enough to spend their largesse is the key problem with the elderly here.

No, unfortunately, our life expectancy has not increased, except statistically – our average life-span in a graph does make it look like eventually we will all live forever...

However, most of the gains in average life span are due to the reduction in infant mortality and those people live normal lives and pay their taxes. They don’t just arrive at pension age to be a burden on society in general and a particular burden on the treasurer and the health minister.

Using these figures is similar to taking a set of twins and saying that if one twin died at birth and the other lived to be 100 then statistically their average age at death is 50. That’s not telling the story of either of them. That’s what statistics are good at; not telling the story.

That’s why politicians love them. That’s what politicians are good at too; not telling the story.

John Quiggin, author of Zombie Economics had this to say on the subject: ‘It’s worth pointing out that, with pension age eligibility rising from 65/60 when the age pension was introduced around 1910 to 70/70 by 2035, men will have lost half of the extra retirement years gained from higher life expectancy and women the whole gain. The big problem we face is underemployment of prime-age workers, not the fact that we aren’t dying early enough.’

A concept Hockey and now Morrison seem totally unable to grasp is that life expectancy will show a significantly increase if more young people survive child birth and young adulthood, rather than just actually extending older people's lives.

Take as an example a sample in around 1900. In the sample of 10 kids – 2 die at birth 3 die before the age of 10 years and 5 live to be nearly 80 years old. Life expectancy is somewhere around 42 years. Now today take a sample of 10 kids. All survive child birth and live into their 70’s. Life expectancy is around 75. That’s an Increase of 33 years in life expectancy, even though many people were living just as long or even longer in the past. Put that in a graph and you have Hockey living to 150 years.

So, the biggest gains in life expectancy came from things like child vaccinations, improved care around births etc. Even workplace health and safety has made a big impact. To this can be added that after 1945 there have not been large percentages of the younger generations of males who have either died, or experienced life-shortening injuries or illnesses, as a result of wars.

Both Hockey and Morrison and now Lea seem disappointed with that.

It is true that there have been very modest increased in what is known as ‘maximum life expectancy’ which only requires one person in the world to live longer than everyone else. Historical detail is too sketchy for this to be reliable and it’s not worth mentioning anyhow.

Animal studies suggest that lengthening of human lifespan could be achieved through reducing food consumption. Although calorie restriction has not been proven to extend the maximum human life span in countries where food is scarce – as in famine or near famine. Hockey didn’t seem to show any interest in this research for his welling and longevity.

So initiatives on preventing young people's deaths have a greater statistical impact than any observation you can make on the health of older people. That's why obesity has a lesser relative impact on life expectancy than advances in medicine for children.

So why not target that area (medicine for children) in the budget reforms. That’s where the increase in longevity is coming from.

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