New proposal to ‘ring-fence’ super towards aged care

8 August 2023
| By Rhea Nath |
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A national industry association has called for changes to the superannuation system, proposing a portion of these retirement savings be directed towards funding the individual’s aged care.

An issues paper by the Aged & Community Care Providers Association (ACCPA), which was established in July 2022 following recommendations of the Royal Commission into Aged Care Quality and Safety the previous year, has explored whether super could be ring-fenced towards aged care funding.

Social insurance was considered to be most applicable as a long-term solution for future generations, it said, and could be incentivised and designed as an extension to the super guarantee (SG) scheme.

“An example of a voluntary scheme could be realised through enabling superannuation funds to offer products that allow tax-efficient saving for aged care,” the paper stated.

“For example, it could be established through changes to the tax treatment of funds which are withdrawn as a lump sum specifically to pay residential aged care accommodation costs. An alternative could be a compulsory saving approach for which a proportion of superannuation guarantee contributions is ring-fenced to pay for aged care costs.”

However, it also noted this could disadvantage those retirees who never require aged care or who need only limited support.

Submitted to Aged Care Minister, Anika Wells, and the Aged Care Taskforce, the paper is the product of the Aged Care Financial Sustainability Summit held in June, where the ACCPA brought together 43 organisations representing consumers, aged care providers, unions, experts, and government bodies. 

An interim report is expected by October and a final report is due to be handed to the government in December.

ACCPA chief executive, Tom Symondson, stated that every Australian should have access to high-quality aged care, regardless of their location, income, or financial means; however, current funding arrangements are unsustainable.

“Following discussion by a broad group of stakeholders, the paper identifies that those with the means should be asked to pay, or partly pay, for those expenses they have paid for their entire lives. That includes accommodation and lifestyle expenses,” he said.

“The superannuation system is designed to provide an income during retirement, enabling people to remain financially independent as they age. We want to see a system that encourages use of superannuation as it was intended.”

Speaking to ABC News Breakfast, Minister for Financial Services, Stephen Jones, said the purpose of super is to provide for retirement income.

“It strikes me as odd in a system which is about retirement income that a third of the cheques written by superannuation fund, by value, are bequests,” he said.

“It’s not the purpose of superannuation to have a tax preferred, state planning mechanism. It’s for providing for people in their retirement.

“We’ve got a crisis of funding in aged care, at the same time, we have one third of the value of funds being written out in requests. That doesn’t square. It’s a conversation that we need to have.”

A previous report by CompliSpace suggested the majority of Australians wanted their loved ones to access appropriate aged care and would want them to use the money saved away towards this.

Some 55 per cent of respondents said older people themselves should be responsible for funding aged care followed by taxpayers (24 per cent) and families (22 per cent).

Australia’s $3.5 trillion superannuation system is the fourth-largest retirement saving scheme in the world and is forecast to reach $5 trillion by 2034, the ACCPA issues paper added. 
 

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Submitted by John Zwartkruis on Tue, 08/08/2023 - 12:52

This is an unacceptable proposal and must not be made mandatory. Our whole life we paid Super for Retirement purposes. This included knowing, but hoping not, to fall victim of needing aged care. If however aged care became necessary, then our Super would still pay our income and help pay for our Aged Care Needs.

To now Ring-Fence part of my, and everyone else's Super, restricts our freedom to enjoy our retirement years the way we had planned. This proposal is TOTALLY UNACCEPTABLE.

Prior to my retirement I was a Financial Planner. I always advocated to my clients the need to plan their finances as well as their daily activities, so that retirement would be rewarding and enjoyable. To now be targeted and have part of my and their Superannuation quarantined is imposing a new rule that was never part of the Superannuation Rules during our working years.

Furthermore, I find it most offensive to read that families whose incomes can be as high as $530,000 p.a. still qualify for Child Care support. This is totally out of balance and to now propose to Ring-Fence of our Super is an unwarranted attack on our Senior citizens who worked hard all their lives so that they can enjoy a richly deserved Retirement.

I say a definite NO to this proposal. Shame on the Superannuation Industry for proposing it. I urge all retirees to voice their opinion on this subject.

Submitted by John Zwartkruis on Tue, 08/08/2023 - 13:03

This is an unacceptable proposal and must not be made mandatory. Our whole life we paid Super for Retirement purposes. This included knowing, but hoping not, to fall victim of needing aged care. If however aged care became necessary, then our Super would still pay our income and help pay for our Aged Care Needs.

To now Ring-Fence part of my, and everyone else's Super, restricts our freedom to enjoy our retirement years the way we had planned. This proposal is TOTALLY UNACCEPTABLE.

Prior to my retirement I was a Financial Planner. I always advocated to my clients the need to plan their finances as well as their daily activities, so that retirement would be rewarding and enjoyable. To now be targeted and have part of my and their Superannuation quarantined is imposing a new rule that was never part of the Superannuation Rules during our working years.

The comment that a third of payments are bequests and not as income, is an unfortunate outcome of life. No-one has their life term notified in advance. Death can occur early in retirement or late. It can come as a result of accident or illness. The question posed prior to Retirement was; - "How long do you think my money will last?". The answer was always based on average mortality rates for Men & Women and then judging on the survival rates of other family members who had gone before them. Because we don't know when our life is going to end, and an earlier death leaves behind unspent savings, is no justification to now determine that this should be ring-fenced and segregated to pay for Aged Care. It smacks of Death Duties which were abolished more than 40 years ago.

Furthermore, I find it most offensive to read that families whose incomes can be as high as $530,000 p.a. still qualify for Child Care support. This is totally out of balance and to now propose to Ring-Fence of our Super is an unwarranted attack on our Senior citizens who worked hard all their lives so that they can enjoy a richly deserved Retirement.

I say a definite NO to this proposal. Shame on the Superannuation Industry for proposing it. I urge all retirees to voice their opinion on this subject.

Submitted by Ay on Tue, 08/08/2023 - 15:49

Hey Stephen,

what age am I going to die? No really, when EXACTLY am I going to die?

This is why there are bequests, because many people die sooner than they hoped but need to ensure they have capital to fund the income required if they live longer than expected.

But you've got that covered haven't you? We know what you are up to.

Government bond backed annuity anyone? Used to fund ESG and Industry Fund infrastructure?

Just steal it all now and be done with it.

Submitted by eric de leacy on Mon, 09/25/2023 - 10:37

i am 77 and still working what the hell do i need to ring fence money for aged care if i do need i have enough to pay for it
this would apply to those with big balances but those with low balances cant pay for it with or without ring fencing

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