Retirement review compromised?

Federal Treasurer Josh Frydenberg announces first major review of Australia’s retirement income system in 30 years, with a focus on ‘putting more money into the pockets of retired Australians’.

And he led with some good news for most older Australians, ruling out including the family home in an assets test for the Age Pension.

The Government’s announcement follows continued pressure from the Productivity Commission (PC) to conduct a retirement income review prior to increasing the superannuation guarantee rate from 9.5 per cent to 12 per cent.

The review will examine the machinations of the Age Pension, compulsory super and voluntary savings.

“It will be very important in helping to determine future policy positions by creating a fact base of what is happening in the system, particularly as we have an ageing population, people are living longer and our superannuation pool is growing dramatically over time,” said Mr Frydenberg.

He said the Government would not consider including the family home in the assets test.

“Our position hasn’t changed and that will never be part of our policy,” he said.

So far, the Government has announced very broad terms of reference for its inquiry.

Mr Frydenberg and Assistant Superannuation Minister Jane Hume said in a statement 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 would “establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians”.

The terms of reference say: “It is important that the system allows Australians to achieve adequate retirement incomes, is fiscally sustainable and provides appropriate incentives for self-provision in retirement.”

The review will examine the three pillars of the retirement income system: a means-tested Age Pension, compulsory superannuation and voluntary savings, including home ownership.

It will also identify how the retirement income system supports Australians in retirement; the role of each pillar in supporting Australians through retirement; distributional impacts across the population and over time, and the impact of current policy settings on public finances.

The family home is off the table, as is, it seems, increasing the pension age to 70. It remains to be seen whether superannuation concessions and dividend imputations will be analysed. However, the superannuation guarantee increase remains government policy.

“Our position hasn’t changed, it’s legislated,” said Mr Frydenberg.

“The Productivity Commission recommended we conducted a review; we’re going ahead with the review. Our focus is putting more money into the pockets of retired Australians.”

YourLifeChoices has been researching and analysing retirement income and retirement affordability since its establishment in 1999. Over this time, despite the growth in superannuation savings, little progress has been made for many retirees, says YourLifeChoices publisher Kaye Fallick, with money spent on superannuation concessions (according to the Australia Institute, currently $43 billion) set to overtake that spent on the Age Pension (currently $48 billion) in 2024.

“The retirement income review is the first comprehensive review of the different facets of retirement income for decades. It presents a real opportunity to get the settings right – and to ensure a more equitable division of Australia’s wealth pie,” she says.

“Sadly, it seems it is already compromised. Any review of retirement income should include all aspects of retirement funding, not just super, private savings and the Age Pension – but also the very significant role the family home has to play. If the family home is not important, why then did the Federal Government introduce a greatly expanded Pensions Loans Scheme in July?

“Unlike most Federal Government reviews and inquiries, this review is not required to offer recommendations. It is, instead, being asked to put ‘facts on the table’ for the government of the day to consider.

“So it is fair to ask if we could be spending millions on a review that goes nowhere and does nothing, while so many retirees continue to live out their days in genteel poverty?”

The Actuaries Institute also has succinct views on what should be achieved by the review.

“The overarching objective should be to ensure that Australians can confidently live their retirement years in dignity. At a minimum, it will require better integration of the current disparate Age Pension and superannuation systems, but it can go much further and better integrate with our aged care and healthcare systems. In assessing any proposals for reform against such an objective, the institute has considered three guiding principles: Australian retirees should have financial security; the system should be efficient without unnecessary complexity or costs, and it must be fair,” it said in a paper released earlier this month.

“Ultimately, at stake is the opportunity to deliver landmark reforms which will deliver a better quality of life to Australian retirees in a way that is efficient and fair for all Australians. The Actuaries Institute encourages that debate to start now. If it does not, Australians may lose the opportunity presented by the fiscal headroom of the projected declining Age Pension costs, and the lead time we have to prepare for known longer-term changes such as patterns of home ownership and work, longevity, and growing health and aged care costs.”

The review will be overseen by a three-person panel led by former senior Treasury official Michael Callaghan accompanied by Carolyn Kay, a member of the Future Fund’s board of guardians, and Deborah Ralston, chair of the Self-Managed Super Fund Association and a member of the Reserve Bank’s payments system board (and coincidentally a spokesperson for the Alliance for a Fairer Retirement System which opposed Labor’s franking credit policies).

The Opposition has concerns about the Government’s commitment to the review, evident, says Shadow Treasurer Jim Chalmers, by the timing of the announcement.

“If the Government was serious about this retirement income review, they wouldn’t have dropped it out on the eve of (AFL) Grand Final weekend, hoping nobody would notice,” said Mr Chalmers.

What would you hope to see included in the review? Do you think it’s fair that two key items have already been removed from the table prior to the review?

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The sweet spot and super
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Written by Leon Della Bosca

Leon Della Bosca has worked in publishing and media in one form or another for around 25 years. He's a voracious reader, word spinner and art, writing, design, painting, drawing, travel and photography enthusiast. You'll often find him roaming through galleries or exploring the streets of his beloved Melbourne and surrounding suburbs, sketchpad or notebook in hand, smiling.


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