The art of the pickpocket, when they’re a good one, is that you never know until much later that you’ve been robbed.
They could bump up against you on a crowded bus, politely apologise, and disappear into a crowd, laughing as they count your cash. You are none the wiser until you feel for your wallet.
If you’ve walked the streets of Rome, or many other European cities, you may well have been accosted by the gangs of street urchins whose method of distraction is to accost you in a group, offering to sell you a tatty looking newspaper, while their partners in crime quickly have their hands in your bag and are off with your holiday spending money.
But don’t be fooled. You are about to have your pocket picked.
The beauty of it is you’ll never see his hands move and you may not know for years that you’ve been fleeced.
He yesterday released a review into Australia’s retirement income system. Running to 600 pages, it is detailed and broad-reaching, examining the entire complex web of rules and conventions which determine how much money you end up with when your weekly pay packet finally stops and you enter your golden years.
As the Treasurer said, the review looked at the three pillars of our retirement income system – the age pension, compulsory superannuation and voluntary savings, including home ownership.
It was carried out by three very eminent and independent experts in the field.
They found overall that the system is sound and sustainable and while not making specific recommendations, made a number of observations.
For instance, they observed that the aged pension helps to reduce inequality because those on lower incomes receive a higher rate of the pension.
They also observed that the pension system helps act as a buffer against economic downturns because as retirees exhaust their savings, they always have the pension as a safety net.
As well, the review panel observed that there is room in the system for more efficient use of assets to bolster income in retirement. That is, it should be easier to use some of the equity in your home and turn it into cash. Obviously, that means less of the house to leave to your children but for many people it’s an option at least worth considering and, it could be argued, the overall system should reduce the obstacles in the way.
The review also looked at the very serious problems of gender inequality in retirement income, how women invariably end up with much lower incomes in retirement than men because they are more likely to take time out of their careers to focus on family. That includes bringing up children as well as caring for the elderly.
All of these observations are reasonable and legitimate and deserve consideration when governments and others make decisions on the future of the retirement income landscape.
But there is also one little nugget in that report which will have important implications both politically and for your hip pocket.
It’s being seized on by thousands of employers around the country and it is the review panel’s comments on the superannuation guarantee levy.
Most of us would rather get teeth pulled than delve into the complexities of their superannuation. So you may not know that, by law, your boss must pay 9.5 per cent of your wage into your superannuation scheme.
You may also not know that a law has been passed in federal parliament which will guarantee that levy will gradually rise to 12 per cent.
That means you will have more money to spend when you retire.
It’s economics for dummies – the superannuation guarantee rate goes up, you have more money in your pocket when you’re old and you need it most.
So, here’s the thing. In the 600 page report into the retirement income system, there is an observation that a boost to your income in the future could come at the cost of a lower income right now.
“A rate of compulsory superannuation that would result in people having an increase in their living standards in retirement may involve an unacceptable reduction in living standards prior to retirement, particularly for lower-income earners,” the report says.
For some in the government, that sentence is a very valuable hand grenade which they hope will help explode your guaranteed better life in retirement.
A number of backbench Coalition MPs are pushing for the government to scrap the rise in the superannuation guarantee levy, arguing that the Covid recession has made it unaffordable.
Josh Frydenberg hasn’t revealed all of his thoughts on the issue but today he laid the groundwork for such a decision to scrap the rise in next year’s May budget.
While he said no decision has yet been made, he did note the views of the retirement income report, while also highlighting that the Reserve Bank Governor has pointed out that there is a “trade-off between a person’s present wages and the superannuation guarantee” and mentioned that the Grattan Institute voices a similar opinion.
The Treasurer also raised the current climate.
“The key point to underline here is that we are living in a very different economic environment than we were this time last year. We have been subject, as a nation and a global economy, to a once in a century economic shock with Covid-19,” he said.
So, don’t be surprised if we find out next May that the legislated rise in your retirement income will evaporate before it gets anywhere near your superannuation account.
The argument that a rise in future income is unjustified because of the current crisis is all well and good, if the future income cut is meet with an equivalent pay rise right now.
There’s a very obvious case to be made that a general rise in wage rates will stimulate the economy and help pull the economy out of recession.
But, unsurprisingly, those arguing to scrap the rise in the superannuation guarantee levy are not proposing any such compensation.
Scrapping the levy increase will not encourage spontaneous generosity on the part of Australia’s employers, with wage rises for all.
Those against the rise in the superannuation guarantee levy are merely suggesting employers are less likely to offer pay rises if they have to fund extra super.
So, you’re being told to give up your retirement income boost because it could discourage your boss from giving you a pay rise. You’re not actually being given anything in return.
It’s not a great sell. No wonder it’s being hidden behind the sleight of hand of a 600-page review into the retirement system, an involved and complicated cover for a money grab.
It will be a six month process but it’s still a matter of having your pocket picked.
Being mugged is less offensive. At least a mugger is upfront.