Hi Dave, Where will they shift their money to? Those at the lower end should shift to industry funds, say AusSuper, then they basically get their refunds[via the charge backs in place for pension phase], may or may not lose a little money.
For those a bit higher up the food chain, unlisted and listed property trusts[ 6 to 8%], direct property , unfranked divis from something like Genesis Energy , debt notes like CAMG[about 6%], and always the possibility of a mix and match strategy[say AusSuper, Australian shares, 0.34%] to get exposure to Australian shares , and still effectively get your franking credits, plus maintain your SMSF for the rest[doing the sums, not as expensive as you might think, probably what I will do initially, as I have some messy assets that need to stay in the smsf to be operating effectively]. All good fun, you probably do drop a bit on yield, but nowhere near as much as you would think, and not as much as losing the franking credits.
As far as the pension goes, sure, but that is hardly a positive for net government revenue. One thing to remember about the pension though, with deeming, your income is often irrelevant, and it is the assets test which knocks most people out of the aged pension. So some of those people you talk about dont necessarily become eligible for a pension. But, that is easily fixed by spending up big for a year or three in a lot of cases. Again, not necessarily a plus for government revenue.
One final strategy that may work for some people at the lower end to mitigate some of their losses, lets say a post March 28th aged pensioner[pre 28th aged pensioners, of course, dont give a rat's rectum about all this], take some of the franked shares out of the SMSF[ just be careful how much], hey presto , like magic, franking credit refund appears again, throw the rest into a balanced industry super fund[.66% AusSuper] . I told you it was all good fun. Sounds a bit complex? Have no fear, had a chat with a lovely AusSuper chap last year, they will be gearing up to give cheap advice covering some of the options I have mentioned above if the legislation [by some miracle] gets thru.
Now, I have banged on about AusSuper a bit, but that is because they were easiest to look up, and the only mob I rang, I'm not recommending them, and I'm sure the others are similar. Who knows, there may even be a few retail funds that will be useful, but my natural prejudices come into play here, so I doubt it.
So in summary, the PBO estimates are a crock of ****. And therefore, why are we bothering, except for some semi-religious fascination with stopping refunds, if it doesn't actually produce much in the way of meaningful net extra money for government programs? Lots of aggrieved people, and it just makes it harder to sell more meaningful changes to retirement income taxation, which has to happen, as the present system is unsustainable. Now franking credit reforms outside of super are a different set of problems, but they need tackling in a different way. I wont canvas my thoughts on those , as too many people think I am Hugo Chavez reborn already.
