Ali Moore and Joshua Funder

The 2021 Household Capital Three Pillars Forum will be hosted by Ali Moore and broadcast on September 16 from 9.30am to 1.30pm. Entry to the online event is free of charge and professionals from the financial services and retirement industries are invited to attend.

This year the forum has grown to encompass three separate panel events, covering consumers, the economy and the three pillars of the retirement industry. Senator Anne Ruston will deliver the plenary address while Dr Deborah Ralston, co author of the Retirement Income Review and Professor Hazel Batemen, one of Australia’s leading academic authorities on population ageing and the economy will both deliver key notes. Panelists come together with Ali Moore in the Covid-safe Melbourne studios, from around Australia, and from Europe and North America.

In its third year, Household Capital’s Three Pillars Forum has become a thought leader event, driving discussion and innovation throughout the retirement community sector. The Three Pillars Forum is unique in its focus on bringing together the power and resources of the super, aged pension and retirement home equity sectors, looking for cohesive, collaborative solutions which will create better outcomes for Australian retirees.

Dr Joshua Funder says, “We are delighted to welcome such a broad cross section of experts to our event. From industry leaders to the people whose lives they impact every day, we were committed both to providing the latest information and a forum in which views and experiences can be shared and learning can accelerate.

“We hope that by bringing together an eclectic selection of thought pioneers we have generated new conversations and facilitated networking to work towards our goal of a truly collaborative solution for retirement income funding.”

Panel one: Australian retirees are the wealthiest in the world; but are they loving life?

This panel will explore whether Australian retirees experience confidence and lifestyles that match being the wealthiest in the world. Topics covered included the challenges of delivering coherent financial advice and access to all three pillars of retirement funding, how to provide retirees confidence in their own wealth and lifestyles; the difficulty of accessing information and then implementing appropriate in-home care or aged care.

Panelists: Noel Whittacker, Kyra-Bae Snell, Ben Hillier, Troy Sloan, Jeremy Duffield.

Panel two: Housing and funding retirement; the economic boost of a trillion dollars of Australian retiree property

This session will explore the potential economic boost from releasing the $1 trillion dollar Australian retiree property portfolio.

The expert panel will look at the immediate benefits of releasing the funds into the market, economic multiplier effects of equity release and economic stimulus from both additional funding and consumer confidence. The panel will grapple with the potential positive impacts of intergenerational wealth transfer and the benefits of spending by younger people and the boost to the housing and renovations market as the bank of mum and dad fund their kids and as retirees spend on creating their ideal forever home. Andrew Kail and Professor Thomas Davidoff add valuable international insights.

Panelists: Andrew Kail, Professor Thomas Davidoff, Emma Dawson, Tim Lawless, James Hickey, Bob Officer.

Panel three: Longevity, a blessing or a curse? Uniting the industry to fund an ageing population.

The final panel unites experts from every element of aged care funding including superannuation, the aged pension, home equity including the Pension Loan Scheme, and the latest in technology delivery.

The panel will consider the challenges facing an ageing population and how the industry can unite to provide customer first solutions that give our retirees the very best outcomes. How do we meet the challenges of dealing with elderly and vulnerable customers while providing comprehensive, independent and user friendly guidance?

The panel will discuss key elements from the Retirement Income Covenant Outlook.

Panelists: Dr Deborah Ralston, Steven Reilly, John Maroney, George Haramis, Dr Joshua Funder.

About the Household Capital Three Pillars Forum

Household Capital’s Three Pillars Forum is now in its third year and has grown to be a major Australian retirement income industry event, uniting diverse thought leaders and creating innovation and collaboration.

The 2021 Household Capital Three Pillars Forum will be broadcast on Thursday, September 16 from 9.30am. Registration is free of charge.

Visit the Three Pillars website to learn more.

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They are Professor Deborah Ralston, a former Chair of the Association who stepped down in September 2019 on being appointed by Treasurer Josh Frydenberg to the three-member Retirement Income Review panel, and Bryan Ashenden, Head of Financial Literacy & Advocacy at BT, Westpac’s wealth management arm.

SMSF Association Chair Andrew Hamilton says: “We are delighted to be able to announce these two appointments. Deborah proved an invaluable Board member during her last stint, playing an important role in the public debate on a broad range of retirement incomes policy issues.

“Her many years of being involved in key public policy debates in the financial services industry, with a focus on innovation and retirement issues, is a resource that the Association will be able to tap again, and we look forward to hearing her wise counsel.

“Deborah is a Professorial Fellow at Monash University and is a member of the Steering Committee for the Mercer CPA Global Pension Index. Aside from past academic roles, Deborah is a member of the Reserve Bank Payments System Board, and a non-executive director of Kaplan Business School, Kaplan Higher Education and SuperEd. Deborah was also the inaugural Chair of ASIC’s Digital Finance Advisory Board.

“Bryan’s primary focus at BT is to interpret legislative and regulatory change and distil this into meaningful actions for advisers, advice businesses, clients and consumers.

“A principal focus in this role is to assist building consumer trust in the advice process and supporting advisers in raising professional standards, a role that makes him eminently suitable for our Board at a point of time when the advice industry is undergoing major change.

“Aside from his BT role, Bryan is a lecturer on ethics and professionalism in financial advice and the economic and legal context for financial planning and is a member of various working groups at the Financial Services Council.”

Ralston says: “I found my previous time on the SMSF Association Board to be extremely fulfilling, so I was delighted to accept when asked to join again. As our work on the Retirement Income Review highlighted, we have many challenges ahead and I look forward to contributing to the debate, particularly as it affects the SMSF sector.”

Ashenden says: “I am honoured to be asked to join the Association’s Board. Having been a specialist member for the past decade, I am confident my experiences, especially my current role at BT interpreting legislative and regulatory change, equips me to make a meaningful contribution to the Association and the SMSF sector more broadly.”

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John Maroney

“The intergenerational report (IGR) clearly illustrates the importance of building superannuation savings to offset the growing liabilities related to an aging population”, according to John Maroney, CEO of the SMSF Association.

Australia’s superannuation assets are already the 4th largest pool of such assets in the world. The IGR forecasts that asset pool will increase from 157 per cent of GDP in 2021 to 244 per cent of GDP in 2061.

With the growth of national savings through superannuation, Australia has become a net exporter, rather than a net importer, of capital. As mentioned in the IGR, “It is an important pool of savings for investment and for funding retirement incomes.” In comparison, the Future Fund will shrink from 8 per cent to 2 per cent of GDP over the same timeframe.

Australia’s aging population is an indicator of the success of our health system and continued strong economic growth that continually improves our living standards.

An increasing proportion of retirees will be self-funded over the decades ahead, including many who choose self-managed superannuation funds (SMSFs) as their primary retirement savings vehicle. Increased voluntary savings will help boost the proportion of self-funded retirees, which will help reduce the cost of age pension payments.

Treasury projections suggest that the median superannuation balance at retirement will increase from around $125,000 in 2020-21 to around $460,000 in 2060-61, which will expand the group of those who may find SMSFs attractive and cost-effective.

The Retirement Income Review has clearly illustrated the complexities of the interaction of our pension, superannuation, age care, and taxation systems. Affordable and accessible financial advice is crucial if more Australians are to safely navigate those complexities and choose whether to make additional voluntary savings to be better prepared for retirement.

Dr Deborah Ralston, Professorial Fellow of Monash University and Chair of the SMSF Association Public Policy Committee said, “As the IGR points out, with reduced migration there will be a higher proportion of older Australians in the population going forward. However, with increasing longevity, and more flexible working arrangements, many people will elect to work for longer.”

“Reliance on the age pension will reduce as super balances grow, and at 2.4 per cent of GDP, Australia has one of the lowest cost pension systems in the OECD.”

Mr Maroney said, “One of the short-term reforms that will help boost productivity and help encourage additional savings is to ensure that all Australians have access to high-quality financial advice. This will help us meet many of the challenges illustrated in the intergeneration report.”

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Deborah Ralston

Dr Deborah Ralston will take on the role of Chair of the Household Capital Advisory Board from May 2021. Dr Ralston is one of Australia’s preeminent thought leaders in financial services, superannuation and retirement funding with exceptional expertise in disruption and financial regulation.

Dr Joshua Funder, CEO of Household Capital announced: “Household Capital is delighted to have Professor Ralston join our team. Dr Ralston has exceptional expertise and experience in the retirement funding sector. More importantly Deborah’s long held values are consistent with the mission of Household Capital to ‘help Australian retirees live well at home’. We share a commitment to creating better lifestyles for Australia’s retirees.”

Household Capital and Dr Ralston are committed to helping retirees access all three pillars of their retirement funding: superannuation, aged pension and home equity.

“Australia has to find new ways to help current baby boomers navigate retirement with confidence. Throughout my career I’ve tried to understand finance through the eyes of consumers, their needs and the regulation of markets that meet them. Australians enjoy good health and long lives, high quality housing, a sustainable pension system and a leading superannuation savings system. I’m excited to join Household Capital in delivering widespread, responsible, long-term access to home equity retirement funding to show how Australia can lead the way in meeting the housing and funding challenges of an aging population.” says Dr Ralston.

“Australian retirees are on paper the wealthiest in the world. Unlocking the funds tied up in the third pillar of their balances, their properties, allows their lifestyles to match their wealth.” Dr Funder added.  “We acknowledge the superb leadership provided by Jack Diamond, the outgoing chair of the Household Capital Advisory Board. Jack has been a serial innovator in retirement and superannuation for decades and a founding thought partner for Household Capital.”

In 2019 Dr  Ralston was appointed by the Treasurer to the Retirement Income Review Panel. The Review is a comprehensive study of the current state of the Australian retirement system and its probable performance in the future as Australians live longer lives. The review considered the incentives for people to self fund their retirement, the fiscal sustainability of the system, the level of support provided to different cohorts and the three pillars of retirement income.

Dr Ralston is a Professorial Fellow at Monash University, a member of the Reserve Bank of Australia Payments System Board and holds a number of non-executive director roles. Dr Ralston joins Peter Kell, Gary Weaven, Alastair Peattie, Bob Officer, and Peter Harris on the advisory board.

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Hamilton, who joined the board in February 2011 and was Chair from February 2012 to February 2014, takes over from Robin Bowerman, who will remain on the board as Deputy Chair.

Bowerman assumed the Chair in September 2019 after Professor Deborah Ralston stood down (her term was due to end at this conference) to avoid any perceived conflicts of interest after being appointed to the Retirement Income Review panel.

From 21 February, the board will comprise Andrew Hamilton – Chair, Robin Bowerman – Vice Chair, Robyn FitzRoy, Liam Shorte, Bernie Ripoll, Tracey Scotchbrook, Michael Houlihan and Scott Hay-Bartlem.

Bowerman says the Chair could not be in better hands with Andrew stepping into the role.

“He brings enormous knowledge of the industry, a wide experience about the Association, and a deep understanding of the issues facing our members.

“I also want to acknowledge the enormous contribution of my predecessor, Professor Ralston, in what was a challenging period for our Association, as well as the full support I received from the staff under the leadership of our CEO, John Maroney.”

Hamilton says it’s an honour to again be asked to chair the organisation. “Although our industry is in a period of enormous change, I remain confident that the new regulatory, legislative, and educational framework, which aims to raise the standards across the industry, will be conducive to a business environment in which the SMSF specialist can flourish.”

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Bowerman, who is Head of Corporate Affairs at Vanguard Investments, has been Vice Chair for the past three years and a Board member since 2011.

He replaces Dr. Deborah Ralston, who resigned as Chair last Friday and has stepped down as a Director yesterday, following her appointment to the threemember Retirement Income Review panel that was announced by the Treasurer, Josh Frydenberg, last Friday.

Andrew Hamilton, a former Chair of the Association, has been appointed Vice Chair. Bowerman says: “I am very honored that my fellow directors have asked me to succeed Deborah as Chair.

Although we are all greatly disappointed at losing Deborah before the end of her term, we totally appreciate why she has chosen to resign and wish her all the best in this new important role.

“She has provided the Association with sound leadership at a difficult time for the industry, and I know I speak for all members when I say her contribution has been greatly valued.”

Ralston says: “Unfortunately I find myself in a position where I feel I must tender my resignation as Chair and a Director of the SMSF Association. It has been a privilege to work with my fellow directors, the executive, and the members, all of whom are dedicated to ensuring Australians enjoy a secure retirement.”

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Prof. Deborah Ralston

The independent Review of the Retirement Income System will provide an important opportunity to ensure that Australia’s world-class superannuation and retirement income system continues to evolve in a positive direction for all Australians.

John Maroney, the newly appointed spokesperson for the Alliance for a Fairer Retirement System, says  Alliance members have identified five key questions that should be addressed during the Review or afterwards by the Government:

• How can the retirement income system ensure incentives are in place to encourage those who can save for an independent retirement to do so and avoid disincentives?
• What is an adequate level of retirement income commensurate with their pre-retirement standard of living that older Australians should seek to attain?
• What are the defined objectives of superannuation and the age pension and how should these two pillars work together to ensure intergenerational equity and the sustainability of the retirement income system?
• How can retirement income policy settings ensure the maximum degree of certainty for those planning for retirement over decades?
• Where are there gaps or issues that indicate a lack of fairness in terms of either horizontal (between people with similar circumstances) or vertical (between different generations) equity in the existing three-pillar retirement system?

The Alliance congratulates its former spokesperson, Dr. Deborah Ralston, on her appointment to the Review panel and wishes her and her colleagues on the panel, Michael Callaghan and Carolyn Kay, well for the challenges ahead and pledges to provide carefully considered input to the consultation processes.

Maroney says: “At present, only 30% of the population over 65 is independent of government support.  The remaining 70% is comprised of 42% on the full age pension and 28% on a part age pension.  As the superannuation system reaches maturity and balances at retirement increase, reliance on the age pension will reduce. Over the same time period, the number of people and the proportion of the population, in retirement will increase. The Alliance calls on the Review to consider the adequacy of super to support retirees into the future.”

The age pension is determined by two means tests. The income test reduces the pension as deemed income rises. A higher deeming rates (set by the government) translates into a lower pension and creates an incentive for retirees to invest in risky assets in the pursuit of yield.

There is a need to review the deeming rates used to calculate a person’s deemed income from financial assets and to establish a benchmark which adjusts this rate periodically.  The current deeming rates no longer reflect the market rates of return received by age pensioners who are more inclined to rely on bank term deposits etc.

The assets test reduces the pension as retiree’s assets increase. At present, the age pension taper rate (the rate at which the pension is withdrawn) equates to a “tax” of 7.8% on assets over the age pension asset limit, well in excess of market rates of return available to part-pensioners on these assets. This creates an incentive to reduce assets in order to maximise the pension.

The net present value of the age pension can be over $800,000 for a couple in their 60s. This is supplied by the taxpayer with no effort required or additional savings on the part of the claimant.  If a couple, who own their own home, accumulated $870,000 at retirement, they would find that they are not eligible for the age pension. They may derive great pride from their independence from government welfare; however, with the present taper rate, their income could be no higher than a pensioner couple with half their assets. This may be a disincentive to maximise personal and super savings for retirement. Since its inception the compulsory superannuation system has produced a diversity of outcomes.

Average super balances at retirement are modest for most Australians, and the self-employed and those earning less than $450 per month with any one employer are excluded from the compulsory superannuation system. Indeed, a 2015 Productivity Commission report estimates that around 40% of Australians over the age of 65 years have no superannuation.

Australians plan for their retirement over several decades.  On-going changes to superannuation policy erode trust in the system and can result in unintended consequences for the viability of the system. No changes to superannuation policy should be made without a full regulatory impact statement, which would also accommodate potential impacts on the other pillars of the retirement system and grandfathering where appropriate to allow retirees and potential retirees to adjust their plans.

In addition to superannuation, the age pension and their own labour, older Australians draw retirement income from a range of sources including bank deposits, investment in shares, exchange traded funds (ETFs), and property, etc. In addition, about half the wealth for Australians over 65 years rests in the family home.  We strongly support the recent expansion of the Pension Loans Scheme to those who are not in receipt of an age pension as a means by which retirees can draw on the value of the family home.

The Alliance will prepare submissions for the Review and encourages all Australians who have an interest in promoting a fairer and sustainable retirement income system which provides greater adequacy and certainty to respond to the Review’s discussion paper that will be released later this year.

Read the Alliance’s July submissions on the Review’s proposed terms of reference to the Treasurer and Shadow Treasurer.

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Costello, who succeeded Sir Anthony Mason, a former Chief Justice of the High Court of Australia, in the role in August 2017, is resigning for personal reasons.

Speaking on behalf of the Board, Association Chair Dr Deborah Ralston says: “The Association is indebted to Tim for the way he has diligently executed his duties as Patron of our organisation for the past two years.

“What the Board and the members have greatly appreciated is how he has encouraged us to have a broader vision about superannuation, and especially how this relates to the SMSF sector.

“While the ability to enjoy retirement is very much about having financial security, it’s also a time to be able to give back to the community in a way that is beneficial and gratifying to retirees and the broader society – and this is what he asked us to reflect on.”

Ralston says that in succeeding Sir Anthony he was filling “very big shoes”, and he did it admirably. “I know members appreciated his contribution and that we greatly benefited from having someone of his integrity, values, and life experiences in this role.”

Costello says it’s been a privilege and honour to be Patron of the Association. “Seeing how the sector has grown and given confidence to people so that they can feel secure about their future has been a joy to watch.”

Ralston says the Association is seeking a new Patron, and an announcement will be made when Costello’s successor is appointed.

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Prof. Deborah Ralston

Labor has released its election costings that show its spending promises will largely be funded by cuts to the incomes of retirees and other lower income shareholders to the value of $58 billion over the next decade.

“The Labor Party’s refundable franking credits proposal does not target the wealthy,” says Professor Deborah Ralston, a spokesperson for the Alliance for a Fairer Retirement System. “The vast majority of individuals affected, who receive a refund of less than $5,000 a year, would not be considered wealthy by most Australians.”

“Similarly, the majority of affected self-managed superannuation funds (SMSFs) receive a refund of less than $10,000 a year. Most of those funds have two members, so the average refund per member is less than $5,000 per person. Most of these members are not wealthy and the prospect of losing up to 30% of their retirement income is devastating.”

There is much debate about who is considered wealthy. Average annual earnings for full-time adults in Australia in November 2018 were $83,454. This is about the same level of income that would be received by a retiree who has the maximum of $1.6 million invested in a pension fund earning 5% a year. The franking credit refund relating to a diversified portfolio of that size (including 30% allocation to Australian shares) would be just over $10,000.

Michael Rice of the actuarial firm Rice Warner stated last year: “The present value of the maximum age pension for a couple who retires at 65 today exceeds $800,000.” This means that for every self-funded retiree couple who never draw an age pension, taxpayers save, on average, more than $800,000. Of course, most retirees will eventually become eligible for a part or full age pension, but we should avoid adding incentives to the system that encourage retirees to become pensioners before they need to do so.

Older Australians have received relatively little benefit from the Superannuation Guarantee introduced in 1992. The median superannuation balance for Australians over 65 years is very modest, and for those over age 70 the median balance in 2014-15 was zero. Recent ATO statistics show that almost one million taxpayers over age 65 (or almost 60% of those taxpayers) received, on average, franking credits of around $4,000 per year. The value of these franking credits would be lost by those on lower incomes who are ineligible for an age pension while those on higher incomes would retain the full value. The majority of older taxpayers receiving franking credit refunds are elderly women, often widows, left relying on income from a modest portfolio of Australian shares.

Franking credit refunds directly relate to the tax that has been paid on behalf of shareholders by companies. They are not a “gift” any more than any other repayment of overpaid tax by the ATO is a gift. As explained recently by Adrian Blundell-Wignall (former director of the OECD): “These people have paid tax – they are the beneficial owners of companies and had a 30 per cent tax paid for them by the “legal person” charged to do so on their behalf.”

Ralston says: “We need to think very carefully before we reshape the Australian superannuation and retirement income systems, key aspects of which have had bipartisan support since 2000 or earlier. Retirees and those approaching retirement have made plans over many years to enable them to achieve a secure and dignified retirement under the current structure.”

“Any proposals that risk causing major upheaval for over a million people deserve careful considered study within an overall review of the Australian superannuation, taxation and retirement income systems. Key principles of such a review would include fairness, adequacy, certainty and sustainability.”

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Prof. Deborah Ralston

The Labor Party’s refundable franking credit proposal will adversely affect pensioners who choose to use a self-managed superannuation fund (SMSF) to manage their retirement savings, says Professor Deborah Ralston, a spokesperson for the Alliance for a Fairer Retirement System.

Ralston says: “The simple fact is Labor’s proposal will not exempt all pensioners. Any individual who became an Age Pensioner after 28 March 2018 and has an SMSF will lose their franking credit refunds. Those not involved in an SMSF, but who qualify for an Age Pension after 28 March 2018, would still be exempt from this proposal while they continue to receive an Age Pension.”

“It also means that Age Pensioners in some large superannuation funds which do not pay tax now or at some time in the future would lose their franking credit refunds.”

Ralston says there is a legitimate debate about whether franking credits are a withholding credit or a final company tax. “Where there can be no debate is the fact this proposal unfairly targets those individuals choosing to use an SMSF as their retirement vehicle.

“The discrimination against SMSFs inherent in this proposal extends beyond the unfair application of the ‘pensioner guarantee’, with some large superannuation funds claiming they will be able to pass on the benefit of franking credit refunds to their retiree members. However, some large superannuation funds may not be able to pass full franking credit refunds to members if they have a large proportion of members in pension phase, and consequently insufficient tax liabilities to offset the tax credits. In essence, an individual’s tax treatment will depend on what type of super fund they have.”

Ralston says if the policy rationale is franking credits should only be allocated to those members of superannuation funds who give rise to a tax liability, then the policy should be designed to apply at the individual member level within ALL superannuation funds.

“Any changes to the tax treatment of franking credits should be applied equally irrespective of their superannuation structure.

“One recent superannuation policy change which did this was the introduction of the $1.6 million cap on tax-free pension accounts. In this case ALL superannuation fund members were treated equally, no matter how they invested their retirement savings.”

Ralston says SMSFs are an integral part of the Australian superannuation system, providing an important source of choice, control and competitive tension within the superannuation system.

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