Poor buggers!
40,000 retirees forced to keep working because of economic downturn
NEARLY 40,000 Australians who planned to retire this year will be forced into part-time work as the economic downturn erodes the value of their homes and savings.
Figures obtained by The Weekend Australian show the country's 2.3 million retirees are 20 per cent poorer than they were a year ago, with the global financial crisis slashing the value of their assets.
Research by Rice Warner Consulting shows that of the 155,000 Australians who planned to retire this year, between 38,000 and 40,000 will move into part-time employment - if their bosses don't force them out in a cost-cutting drive.
Many will use the pension to supplement their part-time incomes.
Rice Warner director Richard Weatherhead said the drop in value of retirees' wealth would force some back into the workforce and others to reduce their spending. "Those who had planned to buy a new car, refurbish their house or go on a trip are probably reconsidering this," Mr Weatherhead said.
Rice Warner estimates the average amount of lump-sum retirement payments in July last year was $135,000.
"Since then, this figure has been reduced by at least $25,000, but the real loss is even more than this," Mr Weatherhead said.
Seniors groups believe the deterioration in retirement savings over the past year will force the Rudd Government to scale back the way it calculates earnings on retirees' investments.
National Seniors Australia chief executive Michael O'Neill said he expected the social security income test deeming rates would be lowered by a further 1per cent.
A spokesman for Wayne Swan indicated deeming rights would be lowered in April, which would be a financial boon to more than 500,000 part-pensioners.
"We have shown previously that we will act on the deeming rates when interest rates come down, and we will continue to monitor the impact of interest rates," the Treasurer said. The Reserve Bank cut interest rates by 100 basis points in early December and it is expected to cut them by the same amount again within the next three months.
Mr O'Neill said the financial crisis had hit older Australians the hardest. "Most of these people are not in the workforce and so they don't have the ability to recover from this tsunami of the economy," he said.
"There is no doubt a significant number of Australians have had to alter their retirement plans.
"Those headed to retirement have had to put it off for one to two years and we are getting a lot of feedback that those who retired in 2007 and 2008 are looking to re-enter part-time or full-time work."
Deeming rates are used to assess income from financial investments for social security pensions and allowance purposes.
Twice a year Centrelink revalues all shares and financial assets of aged pensioners and gives them a deeming rate.
The financial crisis prompted it to have a separate review in October which resulted in it reducing the deeming rate on November 17. Mr O'Neill said the next review was scheduled for April.
In November, the deeming rate was changed from 4 per cent to 3per cent for the first $41,000 of a single pensioner's financial investments and the first $68,200 for couples. It was shifted from 6per cent to 5 per cent for the balance of financial investments. About 500,000 part-pensioners are estimated to have gained from the latest review.
Alex Dunnin, of financial information firm Rainmaker, said a decision by up to 40,000 retirees to stay in the job market was a big part of the reason why economists were forecasting unemployment to rapidly increase this year.
With more experienced people choosing to stay in their jobs, employers would not have the same levels of staff attrition and could be forced to cut other staff.
Mr Dunnin said that from a government policy perspective, people delaying retirement by a few years might save a bit in pension payments, but he said if it only translated into higher dole payments then it was not worth it.
"Then we have the idea of whether the federal Government should increase age pension payments from 25 per cent to 30 per cent of average weekly earnings. As noble as this sounds, given we have 2.3 million age pensioners, this is a fiscal time bomb."
Craig Hobart, head of retail at fund manager Tyndall, which manages $21 billion in funds, said the financial crisis had resulted in three new strategies being pushed by financial advisers.
"Defer discretionary spending, taking advantage of the falling interest rates to lower debt and defer retirement plans or go part time," he said.
Paul Jenkins, chairman of boutique fund manager Forte Investments, said: "Today's soon-to-be retirees are far more reliant on equity markets, with their fluctuating values, than on traditional defined-benefit pensions with stable values.
"And ... the weak economy is making them question the ease with which they'll launch a second or part-time career."
40,000 retirees forced to keep working because of economic downturn
NEARLY 40,000 Australians who planned to retire this year will be forced into part-time work as the economic downturn erodes the value of their homes and savings.
Figures obtained by The Weekend Australian show the country's 2.3 million retirees are 20 per cent poorer than they were a year ago, with the global financial crisis slashing the value of their assets.
Research by Rice Warner Consulting shows that of the 155,000 Australians who planned to retire this year, between 38,000 and 40,000 will move into part-time employment - if their bosses don't force them out in a cost-cutting drive.
Many will use the pension to supplement their part-time incomes.
Rice Warner director Richard Weatherhead said the drop in value of retirees' wealth would force some back into the workforce and others to reduce their spending. "Those who had planned to buy a new car, refurbish their house or go on a trip are probably reconsidering this," Mr Weatherhead said.
Rice Warner estimates the average amount of lump-sum retirement payments in July last year was $135,000.
"Since then, this figure has been reduced by at least $25,000, but the real loss is even more than this," Mr Weatherhead said.
Seniors groups believe the deterioration in retirement savings over the past year will force the Rudd Government to scale back the way it calculates earnings on retirees' investments.
National Seniors Australia chief executive Michael O'Neill said he expected the social security income test deeming rates would be lowered by a further 1per cent.
A spokesman for Wayne Swan indicated deeming rights would be lowered in April, which would be a financial boon to more than 500,000 part-pensioners.
"We have shown previously that we will act on the deeming rates when interest rates come down, and we will continue to monitor the impact of interest rates," the Treasurer said. The Reserve Bank cut interest rates by 100 basis points in early December and it is expected to cut them by the same amount again within the next three months.
Mr O'Neill said the financial crisis had hit older Australians the hardest. "Most of these people are not in the workforce and so they don't have the ability to recover from this tsunami of the economy," he said.
"There is no doubt a significant number of Australians have had to alter their retirement plans.
"Those headed to retirement have had to put it off for one to two years and we are getting a lot of feedback that those who retired in 2007 and 2008 are looking to re-enter part-time or full-time work."
Deeming rates are used to assess income from financial investments for social security pensions and allowance purposes.
Twice a year Centrelink revalues all shares and financial assets of aged pensioners and gives them a deeming rate.
The financial crisis prompted it to have a separate review in October which resulted in it reducing the deeming rate on November 17. Mr O'Neill said the next review was scheduled for April.
In November, the deeming rate was changed from 4 per cent to 3per cent for the first $41,000 of a single pensioner's financial investments and the first $68,200 for couples. It was shifted from 6per cent to 5 per cent for the balance of financial investments. About 500,000 part-pensioners are estimated to have gained from the latest review.
Alex Dunnin, of financial information firm Rainmaker, said a decision by up to 40,000 retirees to stay in the job market was a big part of the reason why economists were forecasting unemployment to rapidly increase this year.
With more experienced people choosing to stay in their jobs, employers would not have the same levels of staff attrition and could be forced to cut other staff.
Mr Dunnin said that from a government policy perspective, people delaying retirement by a few years might save a bit in pension payments, but he said if it only translated into higher dole payments then it was not worth it.
"Then we have the idea of whether the federal Government should increase age pension payments from 25 per cent to 30 per cent of average weekly earnings. As noble as this sounds, given we have 2.3 million age pensioners, this is a fiscal time bomb."
Craig Hobart, head of retail at fund manager Tyndall, which manages $21 billion in funds, said the financial crisis had resulted in three new strategies being pushed by financial advisers.
"Defer discretionary spending, taking advantage of the falling interest rates to lower debt and defer retirement plans or go part time," he said.
Paul Jenkins, chairman of boutique fund manager Forte Investments, said: "Today's soon-to-be retirees are far more reliant on equity markets, with their fluctuating values, than on traditional defined-benefit pensions with stable values.
"And ... the weak economy is making them question the ease with which they'll launch a second or part-time career."
