Retirement
Current super system flagged as ‘failure’
Australia’s superannuation system is currently failing and will continue to fail without proper intervention that addresses long-term sustainability, fairness and adequacy, a new submission for the retirement income review has flagged.
Current super system flagged as ‘failure’
Australia’s superannuation system is currently failing and will continue to fail without proper intervention that addresses long-term sustainability, fairness and adequacy, a new submission for the retirement income review has flagged.
The Retirement Income Review submission from the Self-managed Independent Superannuation Funds Association (SISFA) has said that any “effective retirement incomes strategy should aim to help most Australians to be financially independent in retirement”.
“Instead of two-thirds being dependent to some degree on the Age Pension, the aim should be to have two-thirds of Australians reliant on their own savings,” the statement read.
It called for the Age Pension to be considered “a safety net” for the disadvantaged, while noting the failures, as it stands, “will cost government more in Age Pensions costs than if the system was made to work”.
SISFA has put forward the main reasons as to why the super system is a failure, mainly focusing on issues with government policy.
The first was the 1988 government decision to accelerate the taxation of super to bring forward its tax receipts before contributions were made compulsory.
Secondly, it outlined that “the constant fiddling by governments has made the system too (unnecessarily) complicated for people to understand and adds uncertainty risk”.
It also called out the annual $25,000 cap as being too low for a large number of Australians to achieve a reasonable pension.
The last reason for the system’s failure, as outlined by the submission, was the citing of the Productivity Commission’s finding that the costs of managing funds is too high.
SISFA has submitted that the Retirement Income Review Panel should be careful “not to present the government with data and ‘facts’ relating to the current performance and position of the retirement sector”, instead using facts to improve understanding of how the current system operates.
It has fears that “this might misdirect their policy formulation to focus on ‘fixing’ perceived anomalies with the current situation to the detriment of the long-term sustainability, fairness and adequacy of the system”.
nestegg has previously queried whether Australia is headed towards a retirement crisis.
A universal pension system is just one strategy that has recently been proposed to improve retirement outcomes for older Australians, while new analysis by Industry Super Australia has hit out at the “unfair” Age Pension means test.
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