The superannuation regulator, APRA, released its latest figures this week. And they are, frankly, extraordinary.

Australians now have almost $4.8 trillion in super.

That’s trillion, with a ‘t’.

The system received $236 billion in contributions over the past year, earned an investment return of 8.6% and paid out $148 billion in benefits.

In a little over three decades, we have built one of the largest pools of retirement savings in the world.

That money is helping, and will help, millions of Australians enjoy a better retirement. It reduces the burden that would otherwise fall on future taxpayers. And it provides long-term investment capital for businesses, property, infrastructure and other assets.

For all of its faults – and I’m about to list some of them – I think superannuation is one of the best economic policies of the last four decades.

We are very fortunate to have it.

But, of course, ‘excellent’ doesn’t mean ‘perfect’.

When I posted some of those numbers on social media earlier this week, I said “For all its problems (and I’d fix many), we are very fortunate to have it.”.

Some followers, very reasonably, asked me what I’d fix. Here’s my answer, in 5 points:

1. Keep super for retirement – and keep politics out of it

Super is our money.

But it is money we are compelled to save because, left entirely to our own devices, many of us wouldn’t put enough aside for retirement.

That comes with obligations, though.

We shouldn’t be able to raid our super whenever a politically popular idea comes along. That includes proposals to let people withdraw it to buy a home.

Yes, helping first-home buyers with their deposits sounds attractive. I understand why people like the idea. But giving buyers more money without increasing the number of homes mostly gives them more money to bid against each other.

Prices rise. Retirement balances fall. And the underlying housing shortage remains.

Governments should also resist the temptation to influence where super is invested.

There may be excellent opportunities in housing, infrastructure, energy or Australian businesses. If a fund independently decides an investment offers an attractive return for the risk involved, wonderful.

But the decision must be made in the best interest of members’ retirements – not based on the whims of politicians. Super is compulsory retirement saving, not a political piggy bank.

2. Radically simplify it

Here’s a phrase I’ve used repeatedly: Super is stupidly complex.

There are different contribution categories, caps, thresholds, tax treatments, account types, preservation rules and withdrawal rules.

And those are only the headlines.

Some complexity is unavoidable. People have different circumstances, and a system covering millions of Australians will always need rules. But this… isn’t that.

Funds spend members’ money administering the complexity. People pay accountants and advisers to understand it. And those with the most money can afford the most sophisticated help navigating it.

Meanwhile, millions of ordinary Australians put super in the too-hard basket.

We need fewer contribution categories, fewer thresholds and a much simpler retirement-account structure.

Thresholds should be automatically indexed. Rules should be written in plain English. And governments should stop tinkering with the system every few years.

You shouldn’t need an accountant and a lawyer to understand how to best manage your super – especially contributions and withdrawals.

3. Break the fee gravy train

Australians don’t get to choose whether to participate in super. We are compelled to put away 12% of our wages. I’m good with that.

But it creates a guaranteed and constantly growing pool of money for fund managers, administrators, advisers, insurers, consultants and everyone else taking a clip of the ticket.

Some provide valuable services. Others? Well, there are an awful lot of comfortable livelihoods being funded by compulsory contributions from Australian workers.

Even apparently small fees matter when they are charged every year, on a growing balance, over four or five decades (and longer, in retirement). Those costs add up, as anyone who’s seen the ‘compare the pair’ ads knows.

The solution? I’d create an extraordinarily low-fee default fund, run independently by the Future Fund.

It would offer a small number of simple, diversified investment options, mostly ETFs, including a low-cost growth option suitable as the default for most working Australians.

That’s all most people would need.

Those wanting a different fund, investment strategy, insurance arrangement or self-managed super fund would remain free to choose one.

But other funds would have to persuade Australians to leave a very good, very cheap default option. They would need to offer better service, genuinely superior performance or some other benefit – and justify the fees they charged.

That competitive pressure would help everyone. Fees would have to fall, or value would have to rise.

(And yes, there would need to be a very high wall between the government and the fund’s investment decisions.)

4. Make sure super is used in retirement

Super is supposed to provide retirement income.

It shouldn’t be functioning as a tax-minimisation or an estate-planning vehicle.

That doesn’t mean retirees should be forced to spend their savings quickly, or sell their growth investments on the day they stop working.

Someone retiring at 65 might live for another 25, 30 or even 40 years. Their money needs to keep working.

Retirement day isn’t the end of the investing journey. For many people, it’s not even close.

But there should be a reasonable expectation that super is progressively used to support someone’s retirement.

We already have minimum-withdrawal rules for pension accounts. I would apply that broad principle more consistently to money left inside super after retirement.

Withdrawals should be sensible and age-based, recognising that people need flexibility, don’t know how long they will live and may face significant health or aged-care costs.

People could still save or invest the money outside super. They could still leave an inheritance.

But super itself should fund retirement, rather than providing an indefinite tax shelter for the next generation.

5. Make the tax concessions fairer

Super should remain concessionally taxed. That is part of the bargain.

We lock the money away for decades, use it for retirement and receive favourable tax treatment in return.

But favourable doesn’t have to mean overly generous, or unlimited.

I would give retirees a substantially higher tax-free income threshold than working Australians. Probably a universal aged pension, too. Above that threshold, retirement income would be taxed at normal marginal rates.

Most retirees would still pay little or no tax. Those receiving very large retirement incomes would make a reasonable contribution.

There is also no convincing policy justification for holding tens or hundreds of millions of dollars in concessionally taxed super.

At some point, the system stops encouraging retirement saving and starts subsidising wealth accumulation.

Of course, any thresholds should be indexed, so inflation doesn’t gradually capture people the policy was never intended to affect.

Lastly, tax should apply to actual income and realised gains – not increases in the paper value of assets that haven’t been sold.

And for the record… any reform should replace complexity, not add another layer to it.

None of these changes would weaken or destroy Australia’s superannuation system. That’s the last thing I want.

In sum…

If Australians are compelled to save part of their income, governments should protect that money, keep politics out of its investment and make the rules understandable.

Everyone should have access to an extraordinarily low-cost default, while retaining the freedom to choose something else.

Super should be used to support retirement. And its tax concessions should remain generous without becoming unlimited.

Seems pretty reasonable to me. Oh sure, those who’d be negatively affected will complain, but that’s just human nature. Policy improvements need to use a broader lens.

Almost $4.8 trillion is an extraordinary achievement. The system that governs it should be improved.

Fool on!

The post Five things I’d change about superannuation appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Life360 Inc. (ASX: 360) shares are down around 55% over the past 12 months.

That is a painful fall for existing shareholders, but the technology business itself has continued moving forward.

I think September could offer an attractive entry point for investors prepared to look several years ahead.

A much bigger audience

As of the end of the second quarter, Life360 has around 102.4 million monthly active users globally, up 16% year-on-year.

Crossing 100 million users is significant because Life360 has created an enormous audience around something families use regularly.

The original location-sharing service remains central, but Life360 is gradually extending its role into driving safety, emergency assistance, identity protection, connected devices, pets, and ageing family members.

I think that gives the company plenty of ways to make its existing audience more valuable over time.

International growth also remains a major opportunity. Life360 is already used around the world, but many overseas markets are much less developed commercially than the US.

More ways to make money

Life360’s growth is no longer dependent on one source. Paying Circles reached 3.2 million during the second quarter, up 27% year-on-year, while subscription revenue increased 31%.

Converting more free users into paying members remains its biggest opportunity, but there’s more to the company than that.

Life360 generated $22 million of advertising revenue during the second quarter, more than four times the amount from a year earlier.

With more than 100 million users, advertising could become a meaningful business without requiring every family to buy a subscription.

Combined with memberships and new family-focused products, I think Life360 now has several routes to increase the value generated from its platform.

The fall does not remove the risks

I think a 55% decline has made Life360 shares great value. But it doesn’t remove all risks.

Growth shares can be volatile. Life360 also needs to keep users engaged, grow advertising without damaging the experience, develop successful new services, and show that international markets can become more valuable.

There is plenty to execute on. But the latest numbers still show strong momentum. Second-quarter revenue increased 38% year-on-year, while adjusted EBITDA rose 53%.

For me, that makes the share price decline easier to view as an opportunity rather than evidence that the growth story has stalled.

Foolish takeaway

A year ago, investors were paying substantially more for a smaller Life360 business.

Today, the company has surpassed 100 million monthly users; its subscription base continues to expand, and advertising is starting to make a meaningful contribution.

There will likely be more volatility ahead. But for investors willing to be patient, I think the 55% decline has made Life360 shares worth buying in September.

The post Down 55%: Should I buy Life360 shares in September? appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has positions in and has recommended Life360. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Important news for Australian seniors: the Age Pension rises on 20 September.

Payments are indexed twice a year, in March and September, using whichever measure of inflation or wages growth is highest.

Given the high inflation figures, this round will deliver the biggest lift in several years.

What the new Age Pension rate is worth

A single pensioner will receive $1,237.70 per fortnight from 20 September.

That is an increase of $36.80 a fortnight, which adds up to roughly $957 across a full year.
The new maximum annual payment for a single pensioner is about $32,180.

Each member of a couple will earn up to $933.00 per fortnight.

Combined, a couple will receive $1,866.00 a fortnight, an increase of $55.60 and about $48,516 across the year.

These are maximum rates and include the pension supplement and energy supplement.

So what is the catch?

Deeming rates also increase by half a percentage point on 20 September.

The lower rate moves from 1.25% to 1.75%, and the upper rate from 3.25% to 3.75%.

The thresholds stay put at $66,800 for a single person and $110,600 for a couple.

Deeming is the government’s assumption about what your financial investments earn, regardless of what they actually earn.

Full pensioners are unaffected by the change, but anyone holding substantial savings outside superannuation may find the pay rise considerably smaller than they were expecting as a result of these changes.

Where the assets test now stands

The assets test thresholds moved as well.

A single homeowner loses the pension at $745,750 in assessable assets.

For a homeowning couple, the cut-off is $1,121,000 combined.

The payment reduces by $3 a fortnight for every $1,000 of assets above the full pension threshold, which is $333,000 for a single homeowner.

How far the Age Pension actually goes

This is where the arithmetic gets interesting.

The Association of Superannuation Funds of Australia puts a comfortable retirement at $55,923 a year for a single person and $78,566 for a couple.

The full single Age Pension of roughly $32,180 leaves a gap of about $23,700.

As such, a couple on the maximum rate are around $30,000 short of the same benchmark.

Where ASX dividend shares fit in

Closing that gap over a retirement lasting twenty or thirty years usually means owning assets that produce a rising income.

The Vanguard Australian Shares High Yield ETF (ASX: VHY), for example, is one of the more popular ways Australians do it.

The fund holds around $7 billion, charges 0.25% a year, and screens the local market for higher-yielding companies.

The fund’s trailing distribution yield has been running well above the broader market’s.

However, the fund is heavily weighted toward banks and miners, so its income rises and falls with commodity prices and credit conditions.

Dividends are also assessable under both the income and assets tests, so extra income can reduce the pension itself.

Foolish takeaway

The 20 September increase is welcome and, for full pensioners, entirely uncomplicated.

For part pensioners with money in the bank, the higher deeming rates will offset some or all of it.

Anyone still working should treat the difference between the Age Pension and a comfortable retirement as the real number to target.

Roughly $23,700 a year is what the safety net does not cover for a single retiree.

Building an income stream from ASX dividend shares is one of the best ways to close it.

The post The Age Pension rises on 20 September. Here’s the new rate appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.