Tax | Superannuation

Retirement income system must be transparent and consistent

Reducing the retirement gap between men and women needs to be a key focus, Federal Opposition Treasurer, the Hon. Chris Bowen has told the launch of CEDA’s research The super challenge of retirement income policy in Sydney.

 

“Until we make genuine progress in giving women improved retirement incomes, our system will be failing in that key objective in providing as many Australians as possible a dignified retirement,” he said.

Mr Bowen said there are two policy responses that will help reduce the gap: “general measures to improve the equity of superannuation tax concessions across the income spectrum, and the targeted measures which deal with women in particular.”

The retirement income system must be transparent and consistent, he said.

“Superannuation should ensure that as many Australians as possible have access to the resources for a dignified retirement without recourse to the full age pension,” he said.

Noting housing affordability as an issue, Mr Bowen said allowing access to superannuation savings for first home buyers is not feasible and will increase house prices.

“Allowing superannuation to be used for something which is not its purpose is not one of those solutions, and not one we can or will support,” he said.

Also speaking at the event, Australian Council of Social Service (ACOSS) CEO, Dr Cassandra Goldie said gender and equity in the retirement income system should be a top priority.

“I am concerned we don’t have a serious effort in terms of policy design on what do around the gender gap in retirement savings,” she said.
“Too often in past efforts on retirement income policy, it gets tacked onto the end and we never quite get there.”

Dr Goldie said while we must also acknowledge the strength of the system, we must recognise that currently Australia has lost track of the core purpose of superannuation.

On the topic of Australia’s retirement income system, Retirement Income Challenger Chairman, Jeremy Cooper said the system is not broken.

“Superannuation is not broken,” he said.

“We don’t actually need another review, I think we have enough reviews already and know what the issues are.”

Mr Cooper said the gap between retirement incomes for men and women is “unacceptably wide” and is an issue that must be addressed.

Mercer Senior Partner, Dr David Knox said the Australia’s retirement policy is a world leader.

“We have a challenge ahead of us but we’ve got to recognise the Australian system is pretty good on the global scene,” he said.

“It’s good because we cover most of our employees although not the self-employed necessarily and we’ve already got two trillion dollars set aside for our future.”

Dr Knox said policymakers now need to be clear about what the objective is of the system and a clear direction forward.

“We should have a clear focus on lifetime incomes in retirement,” he said.

“It’s not just income for the next 10 years, it’s incomes for when we are alive.”

At the research release of The super challenge of retirement income policy in Adelaide, report contributing author and Monash University

Adjunct Professor in Economics, Dr Rodney Maddock  said the system should be focused on helping people save “so they can live a quality life in retirement.”

Dr Maddock said removing unnecessary incentives and letting people save out of their after tax income without subsequent taxation will help solve issues in the system.

“Housing and superannuation have to be brought together, they are both things that you are going to need in your retirement,” he said.

“We need to find a way to actually integrate those two systems.

“The current model makes no sense and we think the correct way is to have them both funded from your after tax income and then no subsequent taxation.”

Also speaking in Adelaide, KeyInvest Managing Director, Ian Campbell said there is potential for greater trial around reverse mortgages in retirement.

“There should be greater trial around reverse mortgages, there should be greater advice,” he said.

“The ability to free up cash in property is one of the ideal areas of reverse mortgages.”

Mr Campbell said it is important to develop financial literacy beyond simply superannuation from a young age to ensure adequate retirement incomes.

CEDA Senior Economist Sarah-Jane Derby said there needs to be better clarity in the superannuation system.

“We need consistency around the objective of the system,” she said.

Ms Derby said superannuation tax concessions are inequitable and also create other problems.

“It creates other problems as well like treating housing and superannuation differently even though both of them are used for the same purpose which is to retire,” she said.

 

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