Means tests must always turn regressive at some point in the income or wealth distribution. Because the means test withdrawal cannot exceed the benefit amount, the implicit tax can only rise with income or wealth so far. From there, it turns into a fixed sum tax, like the notorious Thatcher poll tax albeit phased-in at the lower end.
Consider the Australian Government’s Age Pension assets test, which functions as an implicit wealth tax targeted at the middle class. The single Age Pension benefit is approximately $953 a fortnight. The maximum implicit tax amount can then only be $953 per fortnight – whether you’re worth $600,000 or $600 million. The implicit tax amount payable by wealth (excluding the family home) for a single person is shown below.
By design, Australia’s existing superannuation system reproduces inequalities built into the labor market. This is because employers must pay super as a proportion of wages into individual accounts that then earn compounding returns. Upon retirement, high-income workers may find they own a significant pool of capital.
Meanwhile, lower-income workers — disproportionately women — retire with the lowest super balances. The same will be true of younger or marginalized workers who are trapped in precarious or informal employment. As wages continue to decline and precarious work becomes more prevalent, the number of people with a stake in defending superannuation is shrinking year by year.
To make matters worse, in its present form, superannuation undermines genuinely redistributive institutions like the age pension. This is because conservative political forces are able to present them as a last-resort safety net rather than a guarantee of the right to a decent retirement.
The mega-merger reflects the rapid consolidation of Australia’s A$3 trillion pension industry after a 2018 inquiry found fees charged by some managers were unjustified and eroded workers’ savings, and that many funds were not putting customers’ interests ahead of their own.
The government has since made it mandatory for funds to put member interests first, triggering a wave of mergers as fund boards determine that scaling up results in a better deal for people’s savings.
“The due diligence process we have undertaken demonstrates a strong business case for merging with achievable efficiencies and savings,” said QSuper Chair Don Luke and Sunsuper Chair Andrew Fraser in a statement.
Two of Australia’s largest pension funds moved a step closer to creating a A$200 billion ($155 billion) giant as the world’s fourth-biggest pension pot consolidates.
QSuper and Sunsuper Pty. have signed a deal to merge, the two funds said in a joint statement Monday. The Brisbane-based funds will combine by September to create the country’s second-largest pension fund.
QSuper has about A$120 billion in funds under administration and looks after the retirement savings for Queensland state government employees. Sunsuper has about A$80 billion in savings for employees of corporations including Unilever Plc and Virgin Australia.
Italy blocked the export of AstraZeneca PLC’s Covid-19 vaccine to Australia, in a move coordinated with European Union authorities, reflecting mounting frustration in Europe with slow deliveries of vaccines.
The move was prompted by the persisting shortage of vaccines in Italy and the EU, delays in the supply of vaccines by AstraZeneca and the fact that Australia is considered a “nonvulnerable country” to Covid-19 under EU regulations, Italy’s Ministry of Foreign Affairs said.
The decision affects 250,700 doses, a number the ministry said was high compared with what has been delivered so far by AstraZeneca. The doses were bottled at a factory near Rome that is part of the company’s supply chain. AstraZeneca has delivered around 1.5 million doses to Italy, according to the government.
As interest-rate jitters supercharged a meltdown in the world’s biggest bond market, Sam Sicilia barely blinked.
“The markets are wrong” about inflation expectations, said Sicilia, chief investment officer of the A$56 billion ($43 billion) Host-Plus Pty pension fund in Melbourne. “Deflationary forces are bigger. Interest rates are going to stay at effectively zero.”
With governments around the globe still adding to trillions of dollars of stimulus to ride out the pandemic, pension fund managers who are trying to discern the long-term effects are posing the question: Will inflation make a comeback? If it does, more than $46 trillion of global pension assets would be affected as central banks pivoted toward sustained higher interest rates.
Absent that nightmare scenario—and most prognosticators believe science can vanquish any of COVID-19’s shape-shifting—the conventional Wall Street wisdom is for better days ahead on both the health and the economics fronts. And since escalating rates are co-dependent on an improving economy, a sunny thesis appears pretty solid.
Historically speaking, low rates like today’s are an aberration. Thus, at some point, it’s reasonable to assume they will return to normal. Or at least to higher than now, to a degree. A new normal that’s hardly towering.
Shuttering failing Australian pension funds and stopping new accounts being opened when changing jobs will add almost A$100,000 ($77,160) to the retirement savings of young workers.
Minister for Superannuation Jane Hume is shepherding new laws through Australia’s parliament to revamp the industry to weed out under-performing funds and make pension accounts automatically follow workers when they change employers.
It’s designed to protect the retirement savings of the most disengaged Australians — one-in-five of whom have never contacted their fund. Hume estimates that a young person going into a super fund for the first time will be around A$98,000 better off at retirement after the reforms.
Author(s): Matthew Burgess, Shery Ahn, and Paul Allen