Dividend reform could put strain on aged pension

As the House Standing Committee on Economics in Canberra turns its eye to Labor’s proposed franking credit reforms, nearly half (44 per cent) of the respondents in a survey of over 1,400 investors by Plato Investment Management expected the changes to make them more reliant on the aged pension.

Plato questioned what savings the proposal would achieve, as increased dependency on the Government’s aged pension would reduce Labor’s estimations of the policy’s worth.

The survey, undertaken last month, also found that 92 per cent of respondents believed that the proposal reduced the incentive to save for retirement, and 97 per cent said the changes were unfair.

Over 90 per cent of respondents thought the reforms would make the Australian retirement system more complex than it already is and that their stress levels would rise because of the financial impact of the changes, pertinent given the nation’s ageing electorate.

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Plato also suggested that the proposed policy could see money taken out of Australia and Australian companies. Eighty-one per cent of respondents to the survey said they would change their asset allocation if they lost their franking tax refund, with 46 per cent of those allocating in favour of global rather than local shares.

Managing director of Plato, Dr Don Hamson, said there were viable alternatives to Labor’s proposal, pointing to the fact that 70 per cent of respondents thought the $1.6 million cap on super is sufficient to fix the problem of there being a few extremely large franking credit refunds.

It was worth noting that the survey focused on wealthier Australians, with almost two-thirds of respondents investing through self-managed superannuation funds. Of the respondents, 69 per cent were retirees and 15 per cent expected to retire within five years.