Retirement income system fails this group

Australia’s retirement income system is failing singles and older Australians who rent, according to financial research consultancy Rice Warner.

The consultancy’s chief executive, Andrew Boal, made the statement while addressing the All-Actuaries Virtual Summit as Australia waits for the release of the federal government’s Retirement Income Review, which was handed to Treasury on 24 July.

Mr Boal said single retirees were often disadvantaged when it came to super savings and property ownership.

With the Superannuation Guarantee (SG) going to 12 per cent, more than half of couples would get close to a sustainable level of income (YourLifeChoices’ Retirement Affordability Index puts this at $44,212 currently for homeowner couples), but less than 25 per cent of single females and only a third of single men, he said.

“Couples tend to be able to get into home ownership more easily too, so addressing the percentage of single renters is going to be difficult,” he told the summit.

“Government rental assistance has fallen behind what’s needed, so that’s an area that needs to become more equitable in its own right – we think rental assistance probably needs to be increased by 40 to 50 per cent.”

Anglicare Australia said in its 2020 Rental Affordability Snapshot that the “dire lack” of affordable rentals for aged pensioners had to be tackled urgently. It noted that older Australians and those with special needs had higher medical, power and transport costs and assistance needed to be permanently increased, not just while Australia battled the coronavirus pandemic.

The Retirement Income Review was recommended by the Productivity Commission in its report, Superannuation: Assessing Efficiency and Competitiveness, and comes 27 years after the establishment of compulsory superannuation.

The review will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages. It was charged with considering the incentives for people to self-fund their retirement, the fiscal sustainability of the system, the role of the three pillars of the retirement income system, and the level of support provided to different cohorts across time.

Some industry figures fear that concerns about public finances could enable the federal government to ‘legitimately review’ the compulsory nature of the SG and “whether it makes sense to proceed with progressively lifting the SG to 12 per cent in 2025”.

Mike Taylor from moneymanagement.com.au says it is clear “voices within the Liberal Party” are “questioning the rationale behind the current superannuation system”.

“Queensland’s Senator [Gerard] Rennick was just the most recent voice to enter the debate, when he stated, ‘Of all the rorts that exist in this country, nothing compares to superannuation’, arguing that it was devouring the real economy and that at the very least it should be voluntary, not compulsory,” Mr Taylor said.

He said the government needed to be much clearer about the real objectives of the Retirement Income Review.

National Seniors Australia (NSA) has called for “reforms to simplify and strengthen superannuation and pension rules” to ensure “a fair and adequate retirement for all”.

“While Australia’s retirement system is one of the strongest in the world, it can and should do better,” Mr Taylor said, adding that Canada and New Zealand have much lower rates of pension poverty.

“Unlike Australia, which has a complicated system to restrict access to the pension, New Zealand provides a pension to all and recoups some of the cost through the tax system.

“This allows retirees to continue working without penalty.

“While we take 50 cents in the dollar from the pension over a certain threshold, in New Zealand there’s no penalty for pensioners who choose to work. They simply pay tax on their earnings.”

In YourLifeChoices’ submission to the Retirement Income Review, a key point was that the rate of the rental supplement had to be more realistic to assist those experiencing housing stress.

Almost 70 per cent (68.91per cent) of respondents to YourLifeChoices’ Retirement Income Review Survey 2019 replied ‘no’ to the question, ‘Do you feel fully supported by the Australian retirement system?’

What changes do you think the Retirement Income Review will implement?

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Written by Will Brodie

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