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Government maths are no mystery

Government maths are no mystery
As previously revealed by The Australian, the unreleased MARIA modelling has found projections of the share of GDP Australia spends on the Age Pension is “consistent” with a fall of 2.7 per cent last year to 2.5 per cent in 2038 — significantly lower than previous estimates of the cost of providing the pension.
You wouldn’t trust Treasury with a child’s piggy bank. The economic geniuses are surprised by the falling cost of pensions. No doubt a subject thought just too risky with a federal election only weeks away is the vote losing matter of this government’s theft of pensioners’ and part pensioners’ money seized by moving the assets-test goal posts. $2.4 billion clawed back would lower pension costs you bloody fools. Roll on polling day, the baseballs are beside the doors of many.

Source: News Corp

Pension bill falling as super grows

Federal cabinet ministers have deliberated on confidential new Treasury modelling of the nation’s reliance on the Age Pension, which shows the amount of money spent on retirees will fall faster than previously expected, amid calls to dump the planned increase in the superannuation guarantee to 12 per cent.

The Australian can reveal the results of Treasury’s new modelling system, known as MARIA (Model of Australian Retirement Incomes and Assets), outlining the “adequacy and equity” of retirement incomes, has been provided to cabinet on several occasions in recent months, according to Freedom of Information requests.

The Treasury has been developing its MARIA model since 2017 in a generational overhaul of its systems, which provide long-term projections of Age Pension expenditure and take-up, superannuation savings, and the level of retirement incomes.

It can also be revealed that cabinet examined the effect of applying different concessional tax rates to super savings, according to separate requests sought under FOI laws, but the government decided against any move.

In the 2016 federal budget, the government capped tax-free pensions at $1.6 million, or $3.2m for couples, to limit the access wealthier Australians had to generous tax breaks in superannuation.

As previously revealed by The Australian, the unreleased MARIA modelling has found projections of the share of GDP Australia spends on the Age Pension is “consistent” with a fall of 2.7 per cent last year to 2.5 per cent in 2038 — significantly lower than previous estimates of the cost of providing the pension.

The Age Pension is the single biggest government expenditure at nearly $50bn a year. In 2002, the Age Pension cost 2.9 per cent of GDP and was forecast to rise to 4.6 per cent by 2042. But larger superannuation balances have seen that estimate lowered.

The government has been under pressure to scrap the ­planned increase in the superannuation guarantee from 9.5 to 12 per cent, which was partially frozen by the Abbott government.

The Grattan Institute has found increasing the rate would overwhelmingly benefit wealthier savers, hurt poorer workers by forcing them to put aside more of their disposable income for meagre increases in savings, and cost the federal budget an extra $2bn a year in tax concessions.

“The ‘currently legislated’ projections in the 2015 Intergenerational Report saw the Age Pension heading to more like 3.6 per cent of GDP,” said Deloitte Access Economics associate director Doug Ross. “With that in mind, the MARIA result is a bigger shift than you think.

“If true, those projections would be bad news for those still arguing for a lift in the SG rate to 12 per cent.”

Josh Frydenberg would not confirm whether the government was incorporating the new retirement modelling into the federal budget.

“The forecasts in the budget are based on the most current information and models available to the government,” the Treasurer said.

It is unlikely the federal budget will announce any major changes to superannuation or retirement incomes. The Actuaries Institute, which analyses long-term scenarios related to retirement income policy and financial services, was barred from joining the federal budget lockup this year as there were unlikely to be any announcements relevant to the group.

Sources familiar with MARIA said the results of the modelling could marginally affect the budget forecasts over the forward estimates, but would have a greater impact over the outer-year projections.

Treasury developed the model with the purpose of examining long-term effects of policy changes, which could estimate the impact of reforms out to 2050.

The effect of scrapping the increase in the super guarantee can also be modelled by MARIA, and sources said this was highly likely.

The Australian was blocked from accessing the contents of the documents as the information would “reveal a cabinet decision or deliberation”.

“One document was submitted to cabinet after having been brought into existence for the dominant purpose of submission to cabinet,” Treasury tax analysis division principal Matt Maloney said.

“Four documents, if disclosed, would reveal a cabinet deliberation or decision which has not been official disclosed.”

The Productivity Commission earlier this year recommended freezing the increase in the super guarantee rate and reviewing whether it would be equitable to force low-income workers to hive off even more of their salary into nest eggs, and whether the generous tax breaks in the super system have encouraged wealthier Australians to save any more than they would otherwise have done so.

Opposition Leader Bill Shorten and the union sector have attacked the government for delaying the increase to 12 per cent, which is scheduled to take place by 2025. The ACTU is pushing for a 15 per cent rate, in line with demands from the super fund industry.

Treasury modelling in 2013 found the government would continue to lose more revenue through concessional tax breaks in super than it saved in keeping self-funded retirees off the pension, with the loss extending out to 2070. Increasing the super guarantee rate to 12 per cent will result in the total super tax breaks adding more than 10 per cent to the nation’s debt by 2050.

The Grattan Institute found at the 9.5 per cent rate, the average retiree would receive an income of “at least” 91 per cent of their pre-retirement salary under current savings rates, well above the 70 per cent benchmark recommended by developed economies.

The independent think tank found that ending fee-gouging and driving better fund performance, or increasing the retirement age to 70, would result in far higher retirement incomes for all workers at the same time as taking pressure off the budget.

{ 5 comments… add one }
  • Pensioner Pete 25/03/2019, 7:48 am

    I have my own ‘retirement model’ for sitting politicians, at the ready for the May 2019 federal elections, it has been made out of hardwood, is sized 4×2 with a nail in one end, this ‘model’ will be used at the ballot box to clobber the LNP/ALP/Greens for a demonstration of my views on our aged pensions which were stolen by government.

    • Wallace 25/03/2019, 8:02 am

      What? No rule 303 PP?

      • Pensioner Pete 25/03/2019, 8:24 am

        Wallace: Actually would be a waste of a good round when a lump of 4×2 hardwood has a more ‘personal’ touch.

  • Penguinite 25/03/2019, 8:20 am

    The pension bill is falling because old people are dying! Dying from an inability to buy electricity and food!

  • Pepperpete 25/03/2019, 1:02 pm

    Take from aged pensioners who have worked and contributed their entire lives and give to the NDIS ($75billion pa)con artists that will never contribute. A real vote catcher. Bastard politicians.

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