Last week's Guest Speaker: Tony Winwood on Superannuation
Posted by Franz Huber on Dec 03, 2016
If a guest speaker, with lots of numbers and statistics, doesn’t roll up with a PowerPoint, but instead he blue-tacks a sheet of old fashioned easel paper on the wall, one can expect a presentation with a difference… And so we did. Tony came up with a hugely entertaining presentation on a very complex subject. But first the numbers:The first number with lots and lots of zeroes is Two Trillion Dollars. Two Million Million Dollars. That is the size of funds in Australian Superannuation Funds. The $350 Billion is the unfunded liability of various Governments [about $195 Billion of that is Federal Government, according to Budget Papers. Ed.] That 2 Trillion is approximately 1/3rd of the total wealth of Australia, estimated to be about 6 Trillion according to Tony. The Government collects taxes of about $7 Billion per annum. So, what’s the problem? Quite simply: we live too long. Or we don’t save enough. Take your pick. The figures are actually quite simple:
- In 1950, the average life expectancy was 70, or 5 years beyond retirement. That meant that on an average working life of 50 years, to save enough, all one needed for retirement was to put aside about 10%. On average, for every person on the Pension, there were 4.7 people working (and paying taxes) per pensioner.
- In 2016, average life expectancy is 86, or 21 years beyond retirement. On a working life of 50 years, that computes to 42% of your income should be saved. But, if you thought that the “younger generation” will bail you out: at present, only 2.7 people are working for every pensioner. [According to the ABS, the number of people living off Super has risen almost 69% over the 10 years to 2014, from 700,000 to 1,183,000. Ed.]
- Those born today can expect a life expectancy of 91 – 93…
So, how can you protect yourself? Your Editor was very disappointed: Tony did not come up with a magic bullet… “Freedom of Choice is an oxymoron”, Tony exclaimed. “Currently, there are some 250 Funds available to the public. On average, each has about 12 – 15 “investment options”, = about 3000 choices. Then we have about 6000 Self Managed Super Funds, containing some $600 Billion. So, for whom are these funds good for? In Australia, approximately 450,000 people are employed by the Super industry. Their managers charge about $22.5 Billion per annum in fees (approx. 1% per annum). "Abba Was Right" was one of Tony's (paper based) power points. From their song Money Money Money:
"I work all night, I work all day, to pay the bills I have to pay
Ain't it sad
And still there never seems to be a single penny left for me
That's too bad
Ain't it sad
And still there never seems to be a single penny left for me
That's too bad
So, are we getting the picture? In answer, Tony referred to song released when your Editor was in his teens, Bob Dylan:
Yes, and how many times can a man turn his head
And pretend that he just doesn't see?
The answer, my friend, is blowin' in the wind
The answer is blowin' in the wind
And pretend that he just doesn't see?
The answer, my friend, is blowin' in the wind
The answer is blowin' in the wind
[Blowin' in the wind as in 'nobody knows', or as in 'right in your face'? Take your pick. Ed.]
So, what are the '4 Lengths' at the bottom of his paper? “I tried racing horses as an option to secure my future” Tony declared. “But the enterprise miserably failed by about 4 lenghts…”