ALAN JONES:
A couple of weeks ago, earlier this month, we were discussing the plight of self-funded retirees.
And one of my listeners, I think it was Stephanie, drew my attention to a letter from John Fox and that started a widespread debate here.
John Fox had written from Manly, and John, thank you for this, to The Australian newspaper, at the end of January saying, like many self-funded Australian retirees, the value of my investments, in my super fund, has declined by more than 50 per cent.
I am 76, and the rules for my superannuation pension compel me to pay myself six per cent of the balance of my account as at 1 July of each financial year rather than six per cent of the current value.
This, in effect, requires me to pay myself an amount that is greater than 12 per cent of the current value and to sell quality shares at a time when the market is severely depressed, further adding to my pain.
That led to a response from many of you and I documented those concerns and wrote to the Treasurer Wayne Swan after I'd interviewed him on the morning of 5 February.
Well, Senator Nick Sherry is a good man and he is the Federal Minister for Superannuation and he's going to be making an announcement today and I just thought we'd have a quick word with him now.
Nick Sherry good morning.
NICK SHERRY:
Yeah, good morning, Alan.
ALAN JONES:
Thank you for your time and thank you for listening to these poor people because when interest rates go down, of course, it's a self-funded retiree who suffers, isn't it?
NICK SHERRY:
Well, that's right, Alan, and certainly the current circumstances, almost every retiree has seen their balance decline, mainly because of the markets and you know it's causing a lot of worry and concern out there.
ALAN JONES:
Yes, the - just put it simply, minimum payments, as you say here in the statement that you'll be making later, are determined by age and value so when John Fox says he was 76, his minimum payment is six per cent of the balance as at 1 July. How are you going to change that?
NICK SHERRY:
Well, we're going to suspend that requirement through until the end of this financial year, through to 30 June. So what will happen is, in his case, in effect, if he's drawn down his monies depending on how much he's drawn down, he won't need to draw anymore down until the end of the financial year if he doesn't want to.
ALAN JONES:
Why the 30 June?
NICK SHERRY:
Well, I think...
ALAN JONES:
That's only a handful of months.
NICK SHERRY:
Well, it's the end of the financial year. But what I am going to do is, we've suspended this through until the end of this financial year. Before the end of this financial year in May, we'll have a look at the markets again and determine whether we need to extend this for yet another financial year.
ALAN JONES:
Excellent.
NICK SHERRY:
So, I wanted to act on this as quickly as possible, given the feedback and discussion you've had and Wayne had. We've acted quickly for this financial year and then in May, well before the end of the - this current financial year if we need to suspend it again we'll do that.
ALAN JONES:
Right. I made that point to the Treasurer and I wrote to him that George W. Bush had signed a new tax law which allowed retirees to skip all or part of the required withdrawals from individual retirement accounts and related accounts for one calendar year. That may be necessary, of course, if things keep going the way they are.
NICK SHERRY:
Well yes, I think that's right. In fact I was aware of the announcements in the US. I'd received, like you, some correspondence on this, a lot of letters just prior to Christmas and I said to the department look, I understand this has happened in the US, we need to think about it here, give me some advice when you - when we get back from the break in late - mid-late January.
And of course, you had a conversation with Wayne on 5 February and we decided to act last week when Parliament met.
ALAN JONES:
So, just clarifying this now, Nick. I am speaking to Senator Nick Sherry, the Minister for Superannuation and Corporate Law.
So, you are suspending this minimum draw down requirement so when the retiree says to me, well, I can live with a lesser amount, just a dividend payments, then he's okay, that's all he has to live with, he doesn't have to draw down at all if he doesn't want to.
NICK SHERRY:
Well, that's right. In fact what he may have done is, given we're seven months through the financial year, I mean, I am not aware of his individual...
ALAN JONES:
No
NICK SHERRY:
...circumstances how much he's drawn down but he may in fact, because he's drawn down all of the minimum amount already, he may not need to draw anything down between now and the end of the financial year.
ALAN JONES:
Yeah, and the reason you're saying at the end of the financial year is that will close of things then and we might talk to you as we approach that financial year to see whether any of the information you have and the intelligence you've got suggests that this might have to be extended.
NICK SHERRY:
Well, exactly, Alan. And it's to avoid the situation where some retirees in the current environment have had to sell investment...
ALAN JONES:
Yeah.
NICK SHERRY:
...assets and realise losses. I mean, and selling assets in the current market frankly...
ALAN JONES:
That's it.
NICK SHERRY:
...is a poten...
ALAN JONES:
And they run the risk of exhausting their funds prematurely, don't they?
NICK SHERRY:
Well, exactly, exactly.
ALAN JONES:
Good.
NICK SHERRY:
...and it cause enormous worry out there...
ALAN JONES:
It has. Well, thank you for that, that's till the end of this financial year and then as we approach that date I'll talk to you again. Can I just throw something at you while I've got you there as the Minister for Superannuation.
NICK SHERRY:
Yes.
ALAN JONES:
I did also raise this question with the Treasurer in the letter I wrote to him because many people have said to me, well, look, if there is this question, given the Prime Minister's commitment to put more money in the hands of the worker.
Many people were saying to me, why shouldn't it be possible to allow workers to take part or all of the nine per cent superannuation levy as part of their weekly wage for the next, say, three months or six months which would boost the economy, it wouldn't be a burden on employers, it would save jobs and give an average cash injection of about $70 a week to those workers who need the money now and would increase the Government's tax take.
Is that something that you'd be interested in looking at?
NICK SHERRY:
It worries me a bit, Alan, because we know. Let's say that you have a dollar that doesn't go into superannuation, that has a very long-term impact over the years. I know it's negative returns at the moment.
That would mean you don't have that money in your super account in 20 or 30 years time and despite the current negative environment it would be worth considerably more when you retire so that worries me. The other thing, of course, is what people have forgotten about super and again, there's a lot of concern because of the negative rates of return. It's actually doing a lot of good for the economy.
ALAN JONES:
That's it.
NICK SHERRY:
...largest investment pools, it's over a trillion...
ALAN JONES:
Trillion dollars, yep.
NICK SHERRY:
...dollars, is actually working for the economy. It's...
ALAN JONES:
Hey, Nick, use it to build a few dams, will you and pipe a bit of water...
NICK SHERRY:
[Laughs]
ALAN JONES:
We want some water infrastructure, can I put in a plug. [Laughs]
NICK SHERRY:
Yeah, I've heard your plug before.
ALAN JONES:
[Laughs] Thank...
NICK SHERRY:
All I want to say is, Alan, look, I live in Tasmania and there's a fair bit of water there and if we could pipe it over to the mainland I'd be happy to do it.
ALAN JONES:
Good on you. Thank you for ringing and thank you this initiative, and we'll talk towards the end of the financial year.
NICK SHERRY:
Okay, thanks, Alan.
ALAN JONES:
Not at all. That's Senator Nick Sherry. So the Government is suspending from today the current minimum draw down requirement for account based pensions for the second half of this financial year that will be reviewed then at the end of the financial year.