ScoMo has abandoned retirees: Labor

Addressing the SMSF Association National Conference 2021, shadow financial services minister Stephen Jones said Prime Minister Scott Morrison had “dropped” self-funded retirees “like a hot potato” despite the Coalition’s campaign against Labor’s “retiree tax” on franking credit refunds being critical to getting Mr Morrison re-elected in 2019.

“We support the steps taken by the RBA to keep the cash rate at an historic low, which has been critical in helping households and businesses through the crisis, [but] unfortunately most of the talk we hear about the benefits of low interest rates don’t tell the whole story,” Mr Jones said.

“If we think of it as a net shift in wealth from savers to borrowers we can understand there will be one group worse off – self-funded retirees. One of the big reasons Scott Morrison is Prime Minister today is because of self-funded retirees, but it seems post election he’s dropped them like a hot potato.”

Mr Jones said the Coalition had taken “too long” to lower the deeming rate for pensioners in line with ultra-low interest rates, and that current rates to access the government’s pension loan scheme that facilitated home equity release for retirees were also too high.

“At 1 per cent the deeming rate for small investments now sits alongside the cash rate, but for too long it remained well above the rate consumers would hope to get from term deposits,” Mr Jones said.

“The same can be said for the rates the government charges retirees to access the pension loan scheme – if low rates are to be a feature of the future, we’ll have to reassess our assumptions of what’s adequate to sustain retirees over the long term.”

He also pointed to exaggerated assumptions that had been used in the retirement income review to assess the current SG rate as adequate, saying the Prime Minister would “breach a promise” made at the previous election if the government went ahead with freezing the next SG increase or making it optional.

“What we can’t understand [in the review] is the finding that 9.5 per cent was adequate when it’s not supported by the data,” Mr Jones said.

“We dug into the assumptions used in the review to come up with that finding – a 4 per cent annual wage increase over the long term, 7 to 8 per cent real return on funds and a consistent 40-year working life.

“Those assumptions haven’t been true over the last few decades and they aren’t going to be true in the next few decades.”