With Bill working on for another two weeks, I arrived in Wollongong at the beginning of August 2008, just as the full force of the banking collapse in the US hit Australia. My expectation of a senior role in logistics and supply chain at the nearby steel mill collapsed with it. Those who had head-hunted me were made redundant themselves. A fifty-three year old female without a Uni degree whose background was in male-dominated industries, now living in a city with a fraction of the population of Sydney, had no place in what remained of a job-market. In fact, there was no job market left for anyone.
We’d planned to live on Bill’s super (because he was old enough to claim it), but we hadn’t planned to depend on it. Since writing the following re-blogged post, I’ve picked up many international followers. So I’ll try to explain Australia’s retirement income system in broad-brush.
Since 1992 – and in Bill’s case, 1974 – working employees forgo a percentage of their wage before tax. Currently that’s 9.5%. This money is owned by the individual, who invests it with their choice of superannuation fund. It pays to understand their performance and your capacity for risk when making that decision. It’s taxed going into the fund, but at a much lower rate than regular income tax. You cannot access it before age 55 and only then if you are no longer working. Barring embezzlement, mismanagement, fee gouging and economic downturns (all of which I’ve experienced), that regular saving grows due to the magic of compound interest. You can also add additional money if you can spare it. I used to recommend to my young clerical colleagues to forgo one store-bought coffee a day. $1000 a year over thirty years can be a nice little earner in super. By the way, combined across all the funds, Australian superannuation assets totalled A$3.0 trillion at the end of the December 2020 quarter.
As a back-up we have the Aged Pension paid from Government coffers. This money comes into consolidated revenue from the taxpayer, but is not earmarked for the individual and has no relationship to how much tax one paid in their working life. It doesn’t cut in until you reach a certain age, and it is subject to an asset and income test, although thanks to pork barrelling by a previous government, one can have significant assets and still earn a part aged pension. It’s a not-very-generous fixed amount, depending on whether you are married or single, home-owner or renting. Not every Australian qualifies for an aged pension, but for those who are totally reliant on it, life can get very tough, especially if you are in the rental market. Our fastest growing homeless sector is single women over sixty. Casualisation of the workforce, low wages, time out of the paid workforce, ill health and family breakdown are some of the causes.
Lots of variations on these themes, but that’s the umbrella explanation. Hope that puts this next little piece into context …
If anything is certain, it is that change is certain.
The world we are planning for today will not exist in this form tomorrow.
Phil Crosby, American Businessman
When Bill and I decided to buy into Wollongong I was working for a global shipping line, a world leader in the movement of cars and containers. It was a responsible position heading up the front-line customer service for import, export and equipment handling Australia wide.
The company had decided to migrate its computer systems onto the intranet, and integrate shipping and cargo data into real-time world-wide. It was a massive project, with Australia as the first area to go-live. It was the type of software implementation that is quoted in “how-to” manuals – under the section labelled “What can go wrong when ……….”
The U.S. team who were leading the project had joked to me that they decided to throw…
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