Retirement
Does Australia need a universal pension system?
Older Australians are being discouraged to save additional funds due to asset thresholds, but according to new research, a universal pension system may be a way to solve it.
Does Australia need a universal pension system?
Older Australians are being discouraged to save additional funds due to asset thresholds, but according to new research, a universal pension system may be a way to solve it.
Under a proposed system by BetaShares and The Monash Centre for Financial Studies, superannuation would be streamed into defined-benefit schemes and defined contributions.
This streaming would be based on age, income, asset balances and other factors. Where a retiree has not fully funded their pension through their defined-benefit contributions, the shortfall would be funded by the government.
BetaShares senior investment specialist Dr Roger Cohen previously confirmed the “retirement trap” many Aussies are falling into when an increase in savings and investments results in less income due to pension entitlements.
The ETF providers said in a submission to the Australian Treasury that under their proposal, no individual is worse off than in the current one as well as much of the current burden on the government being reduced due to retirement funding falling mostly on the individual.
“With a universal pension in place, an Australian retiree can choose to spend or save additional income or assets based on their personal circumstances, without that choice being distorted by the structure of the system,” Dr Cohen said.
Under the current modelling, retirees are encouraged to spend their additional savings on their homes due to it being exempt from asset testing, instead of choosing to invest them to generate assets and capital growth, BetaShares said.
Dr Cohen believes that changing this policy would encourage Australians to save more, as opposed to the current design where, for certain balances, additional savings are discouraged due to the effect of losing pension entitlements.
Despite its limitations overseas, Dr Cohen said the Australian superannuation system could be used to reduce the fiscal costs of the current retirement system.
“Australia is well positioned to implement a best practice universal pension within its retirement income system. Where the universal pension has failed elsewhere, that failure has primarily been due to problems around ensuring that it is funded at sustainable levels.”
“Despite this, a full or partial universal pension is a successful part of the retirement system in many countries, including The Netherlands, New Zealand and some Nordic countries,” Dr Cohen concluded.
RELATED ARTICLES
About the author
About the author
Retirement Planning
Majority of Australians anxious about retirement as super knowledge gaps persist, report finds
A new study by Aware Super has revealed that a significant majority of Australians aged 45 and over are feeling anxious about retirement, with nearly nine in ten respondents concerned they will run ...Read more
Retirement Planning
AMP’s MyNorth Lifetime boosts financial security and retirement income
AMP has reported that its MyNorth Lifetime retirement income solution is delivering significant financial benefits to retirees, with an average uplift of 50% in total income. Read more
Retirement Planning
Retirement living sector calls for planning reforms amid declining construction confidence
The Retirement Living Council (RLC) is urging governments to streamline planning systems to boost housing supply, following a decline in confidence in age-friendly construction activity. Read more
Retirement Planning
New laws to boost women's retirement savings through paid parental leave
The Australian Parliament has passed new legislation that will see superannuation guarantee contributions paid on the Commonwealth Government's Paid Parental Leave (PPL) scheme. Read more
Retirement Planning
Planning systems under scrutiny as Australia's ageing population grows
The Retirement Living Council (RLC) has called for governments to address planning system shortfalls in preparation for Australia's ageing population, following the release of new data from the ...Read more
Retirement Planning
Retirement Living Council calls for focus on seniors' housing as population ages
The Retirement Living Council (RLC) has urged governments across Australia to prioritise age-friendly housing solutions in response to new data revealing an ageing population. Read more
Retirement Planning
Macquarie University study reveals benefits of guaranteed income in retirement
A new study by Macquarie University's School of Psychological Sciences has found that mental health, enjoyment, and financial security are key benefits of incorporating guaranteed income and annuities ...Read more
Retirement Planning
Retirement villages offer affordable housing amid market crisis, study finds
Retirement villages are providing a significantly more affordable housing option for older Australians compared to the traditional property market, according to new data released today. Read more
Retirement Planning
Majority of Australians anxious about retirement as super knowledge gaps persist, report finds
A new study by Aware Super has revealed that a significant majority of Australians aged 45 and over are feeling anxious about retirement, with nearly nine in ten respondents concerned they will run ...Read more
Retirement Planning
AMP’s MyNorth Lifetime boosts financial security and retirement income
AMP has reported that its MyNorth Lifetime retirement income solution is delivering significant financial benefits to retirees, with an average uplift of 50% in total income. Read more
Retirement Planning
Retirement living sector calls for planning reforms amid declining construction confidence
The Retirement Living Council (RLC) is urging governments to streamline planning systems to boost housing supply, following a decline in confidence in age-friendly construction activity. Read more
Retirement Planning
New laws to boost women's retirement savings through paid parental leave
The Australian Parliament has passed new legislation that will see superannuation guarantee contributions paid on the Commonwealth Government's Paid Parental Leave (PPL) scheme. Read more
Retirement Planning
Planning systems under scrutiny as Australia's ageing population grows
The Retirement Living Council (RLC) has called for governments to address planning system shortfalls in preparation for Australia's ageing population, following the release of new data from the ...Read more
Retirement Planning
Retirement Living Council calls for focus on seniors' housing as population ages
The Retirement Living Council (RLC) has urged governments across Australia to prioritise age-friendly housing solutions in response to new data revealing an ageing population. Read more
Retirement Planning
Macquarie University study reveals benefits of guaranteed income in retirement
A new study by Macquarie University's School of Psychological Sciences has found that mental health, enjoyment, and financial security are key benefits of incorporating guaranteed income and annuities ...Read more
Retirement Planning
Retirement villages offer affordable housing amid market crisis, study finds
Retirement villages are providing a significantly more affordable housing option for older Australians compared to the traditional property market, according to new data released today. Read more
