Retirement
'Misleading' benchmarks could hurt Aussies now and in retirement
Retirement savings benchmarks are misleading Australians and could lead to uncomfortable living in both retirement and working lives, the Grattan Institute has warned.
'Misleading' benchmarks could hurt Aussies now and in retirement
Retirement savings benchmarks are misleading Australians and could lead to uncomfortable living in both retirement and working lives, the Grattan Institute has warned.
That’s according to Grattan Institute researchers John Daley, Brendan Coates and Trent Wiltshire. In an article today, they argued that while pre-retirees might be concerned about their retirement, they will probably be better off than current retirees.
"Of course, the super lobby wants you to believe another story," they continued.
“The Association of Superannuation Funds of Australia, or ASFA, has prepared its own measure of what is needed to live a “comfortable” retirement, and argues that most workers won’t achieve it. Many have argued that, as a result, the average Australian isn’t saving enough,” the researchers said today.
“But ASFA’s measure of a “comfortable” retirement supports an affluent lifestyle more luxurious than most Australians enjoy during their working lives,” they continued, noting that the original benchmark was designed to quantify a “comfortably affluent” lifestyle for the top 20 per cent of retirees.
The benchmark was later redefined as “comfortable”, which the researchers argue “misleadingly implies” that anyone who fails to meet the benchmark will be uncomfortable in retirement.
“The average household can only reach ASFA’s “comfortable” benchmark in retirement by being “uncomfortable” while working.”
They argued increasing the superannuation guarantee from 9.5 per cent to 12 per cent, as has been agreed upon by both Labor and the Coalition, could see wages take a hit and have little impact on boosting retirement outcomes.
“The main beneficiaries from a higher Super Guarantee will be high-income earners, who already reap most of the benefits from generous superannuation tax breaks.
“By being forced to put even more into super, they’ll no longer pay income tax on that income; it will instead be taxed at a flat 15 per cent rate as extra contributions to their super fund.”
Given their findings, the researchers said the current 9.5 per cent rate is “sufficient” to deliver adequate retirement incomes for low- and middle-income Australians.
“Increasing the rate will not help these earners in retirement: most of the benefits will flow to high-income earners, while low-income Australians could cop both lower incomes in retirement and lower wages today. And it will cost the budget money.”
This isn’t the first time the Grattan Institute has entered the superannuation discussion, arguing earlier this year that superannuation reforms won’t be enough to close the gender gap in retirement.
The findings also follow claims by Financial Services Minister Kelly O’Dwyer that increasing the super guarantee will be “detrimental” to wages.
Speaking in early April, the minister warned that increasing superannuation will “lower wage growth in an already low wage growth environment, which will hit low income earners hardest”.
However, the Australian Institute of Superannuation Trustees hit back at her claims, calling on the government to confirm its support for lifting super to 12 per cent.
Grattan’s latest report on super has also stirred up the John Curtin Research Centre, which tweeted this morning that the “spurious, elitist argument against boosting superannuation is smart and generous enough to give working people a pay rise as well as a dignified retirement.
“Big issues of wage theft, casualisation, gender gap or super non-compliance are all ignored.”
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