Uncertainty and risk are a curse on retirement savings, especially superannuation where Australians now have more than $4 trillion invested.
Super builds wealth through equity growth and bond markets but these markets are now under significant strain from the Trump administrations' reshaping of trade tariffs.
Uncertainty and risk have been elevated to levels not seen since the Covid-19 pandemic.
During the past weeks, some Australian retirees have seen their super investments drop by up to 30% or more.
A commentator for the Australian Financial Review observed: "Investors are all wondering the same thing: will the Trump administration leave them better or worse off. Some see method in the madness. Others believe the optimists are engaging in the delusional act of sane-washing; imparting logic and reason where it does not exist."
While our government cannot undo the global uncertainty, it has room to take the pressure off retirees, who rightly worry they won't have enough to fund a comfortable retirement.
Australian governments have a record of making changes to superannuation rules, which undermine confidence in super.
The current market volatility should dissuade all sides of politics from making further substantive changes to super rules.
National Seniors Australia (NSA) is calling on all election candidates to commit to the following actions that can provide support to seniors on fixed and limited incomes:
Halve the super drawdown rate if markets continue to deteriorate.
Freeze Age Pension deeming rates and review the method used to calculate deeming rate thresholds.
Abstain from significant changes to superannuation to restore confidence in super.
NSA CEO, Chris Grice, says the election is an important watershed in the way Australia treats retirees.
"In the lead-up to the federal election, and at a time when Australians are already facing so much uncertainty, we hope all sides of politics heed our call and commit to giving older Australians some certainty over their superannuation."
Under Australia's superannuation rules, superannuants are required to withdraw a minimum amount each financial year, beginning at 4% for retirees under 65 and increasing to 14% for those 95 and older.
During the COVID-19 pandemic and the resulting hit on investor super balances, the government halved the mandatory minimum superannuation drawndown rates to help slow the depletion of super balances.
Currently markets are not yet at crisis levels but we don't know where things are going. According to the Super Members Council, "the recent share market declines are so far relatively small compared to that during COVID and the GFC. During COVID markets fell by more 30%, and by as much as 50% GFC. At the time of writing the Australian All Ordinaries Index was down about 3.8% for the week, and 7.6% for the year."
NSA believes that whoever forms government should consider halving drawdown rates if markets deteriorate to a point that the current drawdown rates undermine retirees' savings.
We're calling on all election candidates to commit to this and demonstrate their support for retirees who, generally, don't have time to recoup losses and who are affected the most.
The next government should continue the freeze on deeming rates (due to be lifted 1 July) until interest rates drop and a fairer and more transparent way to calculate deeming is put in place.
With the cash rate higher than the upper deeming rate, there is a risk that when the freeze ends, a return to the post-2012 methodology will mean:
Hundreds of thousands of pensioners will have their pensions cut
Some Commonwealth Seniors Health Card holders will lose this benefit
Aged care costs will increase for seniors subject to means testing.
The freeze should be in tandem with developing a more transparent method for calculating deeming rates in the future.
The previous method (pre-2012), where the upper rate mirrored the Reserve Bank of Australia cash rate and the lower rate was a proportion of this, would be a fair approach.
With the RBA cash rate high, any change to the deeming rate should be phased in incrementally when indexation of the Age Pension occurs in March and September.
Superannuation is often the single most important investment, outside the family home. Older people rely on their super for financial security in later life.
However, constant debates and rule changes undermine confidence in the system. Myths that older people are dying with their super balances intact, fuel some of these policy debates, but are wrong.
Median account balances for men and women aged 75 and over in 2022 were only $166,185 and $161,201 respectively - this means that 50% of people aged 75 and over had balances less than these amounts.
Older people value the flexibility and choice that Australia's world class retirement income system provides. The inherent flexibility of super in the pension phase is one of its most important features.
This election, we are calling for:
A moratorium on any substantive changes to superannuation rules, with future changes subject to rigorous and independent analysis
Amend the legislated Objective of Superannuation to rebalance its lopsided focus on retirement income to ensure it is not used to justify unfair changes to super rules
Resist the imposition of egregious inheritance taxes
Increase Age Pension gifting limits to provide an incentive for pensioners to donate to charity and gift to younger generations.
