The country’s retirement incomes system is not working, leaving older Australians with more money than they had while they were actually employed, according to a top public policy expert.
John Daley, chief executive of the Grattan Institute, has called for the planned increase to the super guarantee to be scrapped, claiming that the current retirement standards – which are around $43,300 for a home owning single person and $61,000 for home owning couples – are too generous.
Daley clashed with David Knox, senior partner at Mercer, this week as the pair debated the future of the country’s superannuation system on stage at the Actuaries Institute annual summit in Sydney, reports the Financial Standard.
The pair differed in opinion when it came to the wealth of Australian retirees, with Daley arguing that current benchmarks set by the Association of Super Funds Australia (ASFA) wrongly focus on elevating retirees to a higher standard of living, rather than maintaining the standard of living they enjoyed previously.
“We are not trying to get them to have a standard of living in retirement substantially higher than they had during their working lives,” Daley told the conference.
Daley based his claims on the Grattan Retirement Income Projector (GRIP) modelling which was initially published last November and found that Australians are retiring far more comfortably than the AFSA standards suggest.
The report claimed there is no need for retirement incomes to be boosted across the board, stating: “Given the reality that most will have more than enough money in retirement, there is no need to boost retirement incomes across the board. Even if governments wanted to boost retirement incomes, the planned increase in compulsory super contributions to 12 per cent is the worst way to get there.”
This modelling was then used as the basis for the think tank to suggest ditching the super guarantee rise, with contributions set to rise by 0.5 per cent annually to 12 per cent from July 2021, as well as lowering contribution limits and introducing a uniform tax rate in retirement of 15 per cent.
However Knox disagreed, criticising the Grattan Institute on Monday for only considering the income of retirees in the five years leading up to retirement, pointing out that many people wind down and may work less in the lead-up to retiring.
“The living standards we’re talking about are actually set in your 40s and 50s, not in your 60s. We should be looking at the income you earned in your 40s and 50s,” Knox said, according to the Financial Standard.
Earlier this week, one of Australia’s leading actuaries warned that older Australians will be left to rely on the Age Pension as their primary source of retirement income if the Coalition ditches plans to raise the superannuation guarantee (SG).
Michael Rice, founder of the influential consultancy Rice Warner, launched a report on Monday in which he urged the government to stick to an agreement to increase the super guarantee, as was recommended by the Productivity Commission at the start of the year.
According to their calculations, a guarantee of between 10 percent and 15 percent is necessary to provide an “adequate” standard of living for “most, while not being excessively generous to too many” retirees.