The Federal Government is set to review the entire retirement income system, including superannuation, pensions and taxation, as recommended by the Productivity Commission (PC) late last year.
Treasurer Josh Frydenberg announced the Government’s decision in an interview with AFR Weekend.
He said it was time to act on the PC recommendation.
“My intention would be to establish that review.
“I am positively disposed to a review of the retirement income system as recommended by the Productivity Commission.”
Detail of the review would be announced after Mr Frydenberg had consulted with cabinet colleagues and Treasury, he said.
Grattan Institute fellow Brendan Coates told Fairfax Media that a review was long overdue.
“We need to work out the target for an adequate retirement income and what the trade-off should be between living standards while working versus in retirement,” he said.
“We still haven’t worked out what the purpose of the system is and how the different parts of it work together … we are still providing such large super tax breaks, too.”
While the Coalition promised in the lead-up to the election to simplify the tax system and introduce rolling tax cuts between July this year and July 2024, it pledged not to change the taxation of superannuation.
However, Mr Frydenberg signalled that the Government was again likely to try to force a change in the make-up of industry superannuation fund boards.
It had sought to mandate that all super funds have one-third independent directors on their boards. Industry boards have an even mix of union and employer group representatives.
“There are a number of superannuation reforms that remain outstanding from the last term of government,” Mr Frydenberg said, adding, “… There is a strong case for reform to strengthen accountability and governance, improve member outcomes and the overall efficiency of the system.”
The PC sought an independent assessment of whether the compulsory superannuation system set up 27 years ago was achieving its original objective of raising national savings and taking pressure off the Federal Budget, the AFR reported.
The PC said the inquiry should be conducted before the planned increase in compulsory super – from 9.5 per cent of wages to 12 per cent – was phased in between 2021 and 2025.
A Grattan Institute analysis said that increasing compulsory superannuation to 12 per cent would cost Australian workers $20 billion a year in take-home pay and exacerbate sluggish wage growth.
Revealing his new cabinet, Prime Minister Scott Morrison named Senator Jane Hume the Assistant Minister for Superannuation, Financial Services and Financial Technology. Before entering the Senate, Ms Hume was a senior policy adviser for industry fund AustralianSuper and before that had held roles with the National Australia Bank, Rothschild Australia and Deutsche Bank.
Given the unpopularity of Labor’s policy to end cash refunds for dividend franking credits, any examination of retirement incomes could trigger a great deal of anxiety among older Australians and pre-retirees.
Would you welcome a review of the retirement income system? Where do you think it should start? What key components should it cover?
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