The Association of Superannuation Funds of Australia (ASFA) has admonished the widely broadcast Grattan Institute report on savings in retirement as an “unprecedented attack on the retirement aspirations of ordinary Australians”.
ASFA actively warned against the model proposed by Grattan, which recommended lower-income retirees rely on government benefits in their budgeting.
“The Grattan Institute wants to dismantle our world-class retirement funding system and replace it with a model that has two-thirds of the population relying on the age pension,” said Dr Martin Fahy, chief executive of ASFA.
“This report is about two Australia’s, where the well-heeled high earners have a fully funded retirement and the rest rely on the state.”
The association asserted the report’s proposed version of retirement, which calls for a rise in the retirement age to 70 and a 15 per cent tax on retirement savings among other regulations, could leave many Australians with no other option than to sell their homes to fund retirement.
ASFA highlights that the current average of $112,000 in super for men and $68,000 for women means that many Australians are still a way off from having the funds to support the health, age care and other expenses common in retirement.
“In a world where there are broken work patterns, and where women’s balances are 40 per cent less than men, Grattan wants to leave large parts of our society exposed to poverty in retirement,” Dr Fahy said.
“That would be a world where only the few can afford health insurance and where retirement is a dreary replay of the 1950s.”
ASFA’s concerns echo those of financial experts, including former chair of the 2010 Super System Review and Challenger’s chair of retirement income Jeremy Cooper and AMP financial planner Tony Rigby, who made his concerns known to Nest Egg upon the release of Grattan’s findings on Wednesday.
“Don’t expect social security to be there in another 10 years in the same quantum that it is today, because we just don’t know what the rules will be. We have seen in recent years where the government has increased the asset test for the age pension and they’ve made life a bit tougher for existing retirees. In many instances, there’s been no grandfathering of those changes, so it’s been retrospective to existing age pension recipients,” said Mr Rigby.
“We’ve had a lot of clients lose the age pension or see a big reduction in their age pension. So, for future modelling, we tend to leave those things out and ask, if you didn’t have an age pension, would you have enough funds to retire? And when we do the numbers, a lot of people don’t.”
According to ASFA, the report’s recommendations that the proposed 12 per cent increase to the superannuation guarantee be postponed will shift the burden of retirement onto future tax payers. The association asserts that this model will not be sustainable, as the ratio of workers to retirees is set to drop from close to 4.5 people currently to 2.7 people in 2055.
“Without superannuation, the reality is that retirement will be unaffordable in 30 years’ time,” the report warns.
“The Grattan analysis in effect wants people in retirement not to have heating in winter, not to take vacations, to get rid of the car, and skimp on prescriptions and other out-of-pocket health care costs,” concluded Dr Fahy.