Retirement
Unrealistic super modelling behind calls for super cut
A new report has suggested that the Retirement Income Review falsely pumped up the annual retirement income of a median earner by over 40 per cent to “undermine” the legislated super guarantee boost.
Unrealistic super modelling behind calls for super cut
A new report has suggested that the Retirement Income Review falsely pumped up the annual retirement income of a median earner by over 40 per cent to “undermine” the legislated super guarantee boost.
The Retirement Income Review estimates a median earner would retire with about $40,000 annual income a year if the super rate was kept at 9.5 per cent, but new research has revealed their average annual retirement income would be just $24,000 as a member of couple – well below adequacy benchmarks.
According to Industry Super Australia, the modelling underpinning the review was based on a series of “improper assumptions” starting with an “inherent gender bias” that all workers receive super contributions for 40 years.
Conversely, ISA research revealed that across all income percentiles, women average just 30.1 years of contributions, while the male average is 36.2 years.
The advocacy body argued that the review modelled out of existence key elements such as parenthood, career breaks, redundancy, illness, owning a business, unpaid super or any other circumstances that would stop people from receiving 40 years of super contributions.
“The Retirement Income Review adopted objectively wrong assumptions for their base case that vastly inflates retirement outcomes – the troubling conclusion is that the review was rigged to get an outcome the government wanted,” said ISA deputy chief executive Matthew Linden.
“Some sensitivity analysis was undertaken, which point to the problems, but this was excluded from the base case and some impacts were materially understated,” Mr Linden noted.
Moreover, ISA argued that the Retirement Income Review assumes that everyone makes voluntary contributions to their super, when, according to HILDA, almost 80 per cent of Aussies do not salary sacrifice into their super at all.
Among ISA’s other concerns are the review’s assumptions that all benefits are preserved until retirement, the use of CPI deflator to discount retirement income, the use of an inflexible drawdown of assets that doesn’t reflect observed behaviour or the prudent need for some precautionary saving, and the focus on single person cameos rather than couples, which boosts the value of the aged pension.
“Modelling based on wrong assumptions has real-life ramifications, some wish to use the Retirement Income Review’s findings to cut super for millions who otherwise wouldn’t save enough for retirement,” Mr Linden said.
“This would be a terrible outcome as a more realistic working life pattern shows the current super rate is not adequate for most women, low and middle-income earners to fund a secure retirement,” he concluded.
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