Waiting for the nationalisation

According to the AFR, in the Productivity Commission’s draft report into superannuation it was suggested that self managed super funds with balances of less than $1m are not worth it and those dollars would be better in a “professionally” managed fund:

This would imply that the majority of SMSF members are likely incurring costs higher than those incurred, in fees, for members of an average APRA-regulated fund, though their net returns appear to be broadly similar.

The problem with this analysis is that it fails to price in the risk of nationalisation.  And full disclosure, Mr and Mrs Spartacus have a self managed super fund with a balance well below $1m.  Now:

Some call me a conspiracy theorist.
Some people call me the space cowboy.
Some call me the gangster of love 
Some people call me Maurice.

But Spartacus is not going to make it easy for the government to get his savings when the ultimate nationalisation of superannuation comes.  Just look at the scoreboard.

  • Australia’s Commonwealth Government debt is hurtling towards $1 trillion dollars (you know about half the current balance of superannuation funds).  This debt does not include State Government debt.
  • Spartacus does not believe a word of what the Government or Opposition say about spending restraint or debt reduction.
  • The next likely interest rate movement will be upwards.  And if there is another global financial shock, as a massive capital importing country, Australia will need to massively increase interest rates to keep the flows coming.
  • Increasing interest rates coupled with increasing debt means that Australia’s Commonwealth government debt service costs are on track to eat the budget.  Forget NDIS or Gonski spending.  Interest payments are where the growth is gonna be.
  • And when the Government can’t borrow any more or service the debt, what are they going to do?  They will do like Willie Sutton and will go where the money is.  They won’t call it nationalisation, but they will swap superannuation deposits for Commonwealth Government IOUs.

And to nationalise the superannuation system, the Government will start with the biggest blobs which are in the professional superannuation system not the self managed system.  Not to mention that it would be easier to get the money from 10 or so industry funds and 10 or so retail funds rather than the 1 million plus self managed funds.

Yes.  Eventually they will come for the self managed money, but by then, hopefully Spartacus’ savings (or what is left of) will be in crypto.

No Spartacus does not have a crystal ball and cannot see the future.  But for sure he is going to price the risk of superannuation nationalisation in, and accounting for that, there is no minimum superannuation balance at which Spartacus believes it is worthwhile outsourcing to professional managers.

But to each their own.  After all, a government agency (Productivity Commission) has just told you what is better for you.

Follow I Am Spartacus on Twitter at @Ey_am_Spartacus

This entry was posted in Uncategorized. Bookmark the permalink.

39 Responses to Waiting for the nationalisation

  1. OneWorldGovernment

    yes please
    nationalise the lot including universities and artz grants.

    and bicycle paths.

    and the pow wow nbn

    and army, navy and those things that sail in the air.

    and more tax.

    much more tax.

  2. struth

    I don’t mind you spartacus but the third person speak is old hat.

    This isn’t a high school newsletter.

  3. Nobias

    “Slick Willie”, now that is a name that could be well applied to a prominent Canberra politician.

  4. woolfe

    How would crypto currency save you? They know how much you have now would you just say you’ve spent it all and move on to tax payer funded pension? Asking for a friend.

  5. The scenario forecast by Spartacus has precedent in Australia.
    It will not be the first time retirement savings are taken by the state in return for an old-age pension.

  6. Both my wife and I have super in self-managed funds (well under $1 million) and they have been doing very well. ‘Productivity’ Commission indeed.

  7. Dr Fred Lenin

    Don’t know why you are against nationalisation ofall super ,it would enable our able leaders to pay the interest on the interest of the interest on the money comrade rudd and swannie borrowed to give away . The polliemuppets have an awesome reputation for financial genius ,after all they are usually failed lawyers teachers who couldn’t teach and union mafiosi ,so just relax , the money will be in capable hands .

  8. Shy Ted

    Exactly as intended.

  9. …the money will be in culpable hands .

    Fixed

  10. Egor

    Opted to avoid Super by paying out as private company dividends, no directors fees. Voila, no compulsory Super capture. Giving govt cultural marxists control of your money in return for a 15% concessional tax rate vs a 27.5% company tax is a bad decision. Their eventual aim is use of your Super while you get a compulsory self funded annuity (pension)….and all the free tram tickets you need.
    There’s always the Cyprus haircut.

  11. Mother Lode

    The government just can’t divorce itself from the idea that when they throw a bucket of money out the window a river of money flows in through the door.

    And their budget forecasts always assume this – this year we will burn a pile of cash which means we will return to surplus in four years and 30 minutes – just outside the forward estimates.

    There are still quite a few places in the world with the government doing most of the spending and should, therefore, be wondrous metropoles with soaring, glittering towers and the ever present hum of a people eternally engaged in living. You know, places like Cuba, Venezuela, North Korea, Detroit…

  12. RobK

    Sparty,
    I share your distrust of the super fund industry and its feeble regulatory means of existence. The whole thing exists due to over regulation of the tax system (undue complexity) and over taxing of income. You may well stand in defiance of the Productivity Commission as some kind of symbolic theater but your rationale for doing so, I fear, will be in vain because, should that pot of money be called on, it will be effortless for the regulations to sweep-up smsf along with the pros. I think a small simple encouragement to save (say no tax on interest) would be better than the massive cost of super fund compliences.

  13. “Slick Willie”, now that is a name that could be well applied to a prominent Canberra politician.

    You’re too kind. I can’t imagine anything about Peanuthead being slick.

    “Hey babe, wanna see my tool of government?” doesn’t exactly scream suave and sophisticated.

  14. Mother Lode

    Maybe they aren’t so wary of the SMSF’s under a million dollars as the people who manage the wealth carefully enough that they only show a balance of under a million dollars.

    Government have constantly darting, gimlet eyes and talons that ache for the soft, giving texture of flesh. And they are constantly needled by a suspicion that, right in front of them, someone is willfully holding onto their own money.

  15. Empire 5:5

    And to nationalise the superannuation system, the Government will start with the biggest blobs which are in the professional superannuation system not the self managed system. Not to mention that it would be easier to get the money from 10 or so industry funds and 10 or so retail funds rather than the 1 million plus self managed funds.

    Yes. Eventually they will come for the self managed money, but by then, hopefully Spartacus’ savings (or what is left of) will be in crypto.

    FFS. Keep it to yourself. We don’t need to broadcast the obvious and attract attention from the leeches.

  16. RobK

    Egor,
    Ive done the same. I believe I know how to manage and enjoy my money best.

  17. teddy bear

    Personally I wouldn’t mind a national scheme provided compulsory super was abolished and it was entirely opt in, and you could still have a self managed fund instead if you wished. Virtually all my super from my teens to mid 20’s was eaten up through fees because each employer had a separate fund, by the time I got around to consolidating them there was less than $2000 all up.

    I would have loved to have been able to spend all that money on my own investments plus things I needed at the time instead of it being eaten by thieving companies at the behest of our government.

  18. Gold in very small bar cards.
    and
    Card Gold
    There’s the Kangaroo small denomination coin in 1 oz. and 1/10 oz
    Go to the link if you want more information.
    If you want to keep your money, you have to hide it.

  19. TBW;

    “Hey babe, wanna see my tool of government?” doesn’t exactly scream suave and sophisticated.

    I’m beginning to see that my technique of seduction could be better focussed.

  20. egg_

    Slick Willie might do a better job of sorting the NEM than brown fingers Lord Waffleworth.

  21. Speedbox

    ◾The next likely interest rate movement will be upwards. And if there is another global financial shock, as a massive capital importing country, Australia will need to massively increase interest rates to keep the flows coming.

    Yes but rates will rise regardless of any global shock. Sure, a sudden rise will be catastrophic for Australia but I have serious doubts whether “the public” have the capability to absorb any significant rate rises at all. We (or you) have binged on cars, boats, caravans, holidays, more property and anything else you could buy “on the tick”.

    In the meantime, economic growth in the US supported by strong non-residential investment and a tightening labor market are lightly fanning inflation. Anyway, for a number of reasons there have been increases in bank rates and those increases are near certain to continue. Remember that only 1 year ago the benchmark rate was 1.0% in the US with economic conditions very similar to now (GDP growth rate, unemployment rate, inflation), yet the benchmark rate has lifted to 1.75%. Most pundits expect 2.0% by Q4/2018 or Q1/2019.

    So, this all a long way about saying that Australia will come under significant pressure, or more particularly, those with variable rate mortgages and business loans will find the servicing costs of those loans increase as local banks pay more for the wholesale funds in the global marketplace. Coupled with increased energy costs (meaning all energy from electricity to gas to petrol etc), mediocre wages growth, increased Government charges, a spending spree by Shorten and Co, the next few years could be tough.

    Any of 1000 economic scenarios could move rates quickly – and Australia is buggered.

  22. Entropy

    The Productivity Commission isn’t what it used to be is it? First there was the disability insurance brain fart that the naive little economists at the PC did not realise would be immediately fabianed into something like the NDIS monster, and now this.

    Let people look after their own money how they want to , whether it’s an SMSF or an industry fund. It’s their business.

  23. Oh dear Entropy:

    Let people look after their own money how they want to , whether it’s an SMSF or an industry fund. It’s their business.

    Haven’t you got that arse about.
    It’s a national asset.
    You didn’t know?
    Tsk tsk.

  24. nemkat

    I don’t think the Government are on a winner here.
    Abbott was talking about making Super opt in for low income young people, but the idea went nowhere.

    The Unions and their Super Funds will always have a better fairytale to sell [huge balances and money for nuthin’] the gullible and not so gullible than those selling reality and the virtues of self reliance.

  25. nemkat

    Further to that, if a bloke has a $500,000+ balance in BUSS [Qld] or CBUS, which wouldn’t be exceptional, he might feel uneasy about the Government sniffing around Industry Super Fund rorts and rackets.

  26. Now there’s an idea, take union-super funds, give then a promissory note and their source of political funding might be squeezed somewhat.

  27. Bushkid

    egg_
    #2723082, posted on May 29, 2018 at 1:05 pm
    Slick Willie might do a better job of sorting the NEM than brown fingers Lord Waffleworth.

    You’ve got to be effing joking, egg! Slick Willie wants a 50% RET. If you think the system’s stuffed now, you ain’t seen nuthin’ yet!

  28. Speedbox

    By coincidence, I came across this today:

    After years of house price growth in Australia, we could be in for Minsky moment.

    Economist Hyman Minsky had the idea that a long period of growth leads to more speculation using debt, which pushes asset values up. Yet, if the screws tighten then prices can collapse suddenly, which means that borrowers cannot sell assets at the previous high prices.

    Australian house prices have been increasing at a rapid pace in recent years. In Sydney, property prices have increased 74% in the last five years.

    Now, things are starting to cool and property prices are dropping. A slowdown on the property market could also mean we see an end to the wealth effect. The ‘wealth effect’ occurs when asset prices increase and households feel they have more money.…so they spend more. In fact, while many Australians are asset rich, the Australian savings ratio has collapsed in recent years. Households have virtually no savings but have accumulated high debt. The old saying that some people are “only one paypacket from bankruptcy” has never been truer.

    For those who buy near the peak, prices will need to go much higher to get back their original investment plus transaction and/or holding costs, margin etc.

    This is an edited extract but you get the drift.

  29. JohnA

    From this afternoon’s news.com.au headline feed:

    Australia’s peak trade union body says there were critical flaws in the Productivity Commission’s draft findings on superannuation.

    Yeah, we know but the ones the ACTU are looking at, are NOT the same flaws, are they?

    Details are behind the paywall, but let us guess: the flaws which the ACTU found had to do with the freedoms individuals currently enjoy (ha!) like lump sums and the very existence of self-managed funds.

  30. stackja

    The Australian
    INDUSTRIAL RELATIONS

    ACTU slams Productivity Commission’s super report
    Australia’s peak trade union body has slammed a landmark report into superannuation, saying there were critical flaws in the Productivity Commission’s draft findings.

    The Australian Council of Trade Unions have labelled a finding in today’s Productivity Commission draft report that super and enterprise bargaining should be de-linked as “badly misjudged”.

    In a statement, the ACTU said there supported some of the findings into the report but had a number of complaints.

    “The peak body for working people … has identified critical flaws in the direction taken by the commission,” an ACTU spokesman said.

    “The suggestion that members’ interests are best served by breaking the link between industry awards, workers’ representatives and employer bodies … is badly misguided.”

    The link between worker’s super and wage negotiations are a result of the Accords drawn up under former prime minister Bob Hawke during the 1980s and were meant to ensure workers receive wage rises without increasing inflation.

    ACTU assistant secretary Scott Connolly said superannuation was an “industrial right” and wants the link to remain.

    “Superannuation is an industrial right and comes from workers’ deferred wages,” he said.

    “The link between employers, unions, workers and their funds has been a key reason why industry super funds have systemically out-performed bank-owned super funds, and a pillar of the success of our retirement system.”

    “It is deeply concerning that many of former banker Kelly O’Dwyer’s ideas — which aim to put our super in the hands of for-profit bankers — appear to be embraced in this draft report.”

    Mr Connolly also said he did not support the creation of an independent panel to oversee superannuation regulation and reform.

    “The ACTU supports taking the politics out of superannuation, but this Government cannot be trusted to establish an independent panel,” he said.

    “Especially given the number of political appointees and politicised agencies under its direction.”

    The ACTU has said it will consider the 570-page report and plans to put in a submission to the Productivity Commission ahead of its final draft.

    COMMENTS

    Jeffrey 47 MINUTES AGO
    Clearly the union movement have enjoyed a monopoly over the work place for far too long and see everything with any tenuous link to a worker’s wages as an “industrial right” that they have the only “right” to say how and where its allocated. What about what all the millions of other people like me want, as the person that earns that wage. I would like Labor politics and unions out of superannuation and out of a lot of other things besides. I can quite happily make independent decisions for myself; I vote for more freedom and competition please.
    /H\ 1 HOUR AGO
    A perfect example of union self-interest hiding behind workers’ rights.

    garry 1 HOUR AGO
    Well they would say that,wouldn’t they!
    Kevin 2 HOURS AGO
    Of course the unions would slam the report as this is their cash cow unfetted and tax free.All they are doing is taking members money by stealth.

  31. Flyingduk

    I fear you are correct Sir! Last time they nationalised gold: next time it will be Super: thats where the gold is now. Winter is coming….

  32. dauf

    SMSFs typically need $200k+ to be worth it. Mine with fees of $1500 pa is doing just fine and once over the $200k , the fees are lower than the industry fund i took it out of. You also get to invest in other places (unlisted funds). Looks like the PC just regurgitates what the ‘vested interest’ industry funds send out. Some of these funds are good (very good) but there statement on minimum balance start are worthwhile is just garbage

  33. Crossie

    The government wouldn’t be in such dire need of money if they didn’t blow it all on importing welfare recipients daily by planeloads. Pause all immigration until you stabilise the national finances and then ask permission from voters to restart it.

    But that would be democracy and we can’t have that.

  34. None

    So took 2 years for some idiot body in New South Wales to decide that Sonia Kruger has to go before the AAT New South Wales because she answered the question on the Today show about Muslims and migration even though the complaint was made by a serial complainer who is basically half idiotic and did not even say how it was that she vilified Muslims whi do not constitute a race in any shape, size or form and given she was only referring to migration a valid topic of public discussion. I guess now Channel Nine will learn of the absolute corruption of the New South Wales kangaroo court system that is easily manipulated by a vexatious claimants l. The lives were care about the same position on free speech I that after all they passed a law 2 or 3 days before Bernhard kennels claim was heard just somehow make it possible for some bunch of public servants to try people in other states as if they are courts. Gladys B is a close friend and confidant of Photios Zimmerman and crew and that’s all you need to know.

  35. Rob MW

    This would imply that the majority of SMSF members are likely incurring costs higher than those incurred, in fees, for members of an average APRA-regulated fund, though their net returns appear to be broadly similar.

    “The problem with this analysis is………………..”

    Actually Sparty, the problem with this analysis is that it is complete , right down the line, fucking bullshit. My SMSF doesn’t pay fees to anyone, except our auditors, ASIC and standard brokerage to eTrade.

  36. Just to remind all that total Australian Government Debt is going to tick over to $800 Billion in the next six months. Data from the Australian Debt Clock.
    The Australian Debt Clock will reach Total Government Debt of 1 Trillion dollars By:
    May 2020 Winston Smith
    December 2019 Robber Baron
    April 2020 Wivenhoe
    July 18 2019 Carpe Jugulum
    October 2019 Carpe ZK2A
    January 2020 Fat Tony
    June 2021 Allergy
    30 June 2020 OWG.

    The Winner will receive a new uncirculated, unframed, $100 Trillion Zimbabwean Dollar Note Australian equivalent to $0.11.

  37. old bloke

    I predict that the Shorten government (perhaps even the present Labor-lite government) will reintroduce the 20/30 rule which applied to superannuation savings, which ended in the mid-1980s. This rule stipulated that a minimum of 30% of superannuation investments be in government bonds and loans, with at least 20% of that amount in Commonwealth Government bonds, the remainder in loans to state government utilities.

    Given that most of the then state government utilities have since been privatised, the new edict would most likely stipulate that the entire 30% be invested in Commonwealth Government bonds.

    The government then could say they haven’t nationalised the superannuation funds, they have simply redirected a portion to “nation building” projects, i.e., highly valued projects like Snowy Mk, II, high speed rail, more mothballed desalination plants, and more wondrous windmills, and it is your patriotic duty, comrades, to contribute to these essential nation building programs.

    I’d also predict a reintroduction of death duties, which would be highly likely in the event of a Labor / Green coalition government.

  38. Fat Tony

    Winston Smith
    #2723604, posted on May 30, 2018 at 6:26 am

    The Winner will receive a new uncirculated, unframed, $100 Trillion Zimbabwean Dollar Note Australian equivalent to $0.11.

    Could just be a new uncirculated, unframed, $100 Trillion Australian Dollar Note by then……

  39. It could be, Fats, but I don’t have one of those yet.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.