Age pension provides better retirement for low income earners than super: Grattan

There’s been plenty of discussion here at Starts at 60 about the changes to superannuation and the age pension. Most

There’s been plenty of discussion here at Starts at 60 about the changes to superannuation and the age pension.

Most of you are well aware and know about the changes and how they will affect you.

But the topic is coming up for debate again thanks to a submission by the Grattan Institute to the Federal Government.

In the submission, the Grattan Institute fires up the old age pension vs superannuation debate and it hasn’t impressed Australia’s super funds.

According to the Grattan Institute, the age pension and rent assistance are “better tools than super” when it comes to providing an “adequate retirement” for low income earners.

“Superannuation is just one part of Australia’s retirement incomes system, alongside the Age Pension and other voluntary savings, including the family home,” the submission states.

“Even without counting the family home, most households of any particular age and level of income or wealth hold as much wealth outside super than inside super. The superannuation system should not aim to fulfil every objective of the broader retirement incomes system.”

In fact, the Grattan Institute’s submission rejects the view that superannuation’s objection is to provide a “comfortable” retirement income for all Australians.8″This view could lead policymakers to force people to save under the Super Guarantee so that their incomes while working are less than their incomes in retirement,” the submission reads.

“This view misleads, because the Age Pension and Rent Assistance are better tools than super to provide an adequate retirement for those on low incomes. And this view would support maintaining generous tax breaks, at substantial budgetary cost, for those whose retirement will be comfortable without them.”

You might be wondering what the super funds had to say in response?

Well, the Chief Executive of the Association of Superannuation Funds of Australia has responded and he’s described the Grattan Institute’s submission as suggesting “the think tank is out of touch with the reality of living costs in Australia.”

“The submission from Grattan, to the Senate Standing Economics Committee Inquiry into the Superannuation (Objective) Bill 2016, is attacking a super system internationally acknowledged as first class and one that is delivering a higher standard of living for retirees,” Martin Fahy told MoneyManagement.

“The ASFA comfortable standard is based on a detailed analysis of the level of spending needed to meet the realities of retirement, including: health and aged care with the associated out-of-pocket medical expenses; running a modest car; basic home maintenance; and being able to run air conditioning in summer and heating in winter.”

He also argued that older Australians didn’t want to rely on the age pension in retirement, and that superannuation was a big part of the solution to the issue of increasing longevity and the costs of aged and health care.

So, what do you think?

Do you think the Grattan Institute is right about the age pension? What do you rely on more in your retirement – age pension or superannuation?











  1. Guy Flavell  

    A beaut thought-provoking article. Yeah, I’d have done it all different if I had my time again.
    NO risky business ventures. NO trust in so-called entrepreneurs. Heaps more paid into
    superannuation and a fair-dinkum approach to accumulating worthwhile assets. I have a
    genuine admiration for Aussies who have carefully and frugally planned for their retirements
    and don’t rely on Government assistance in their ‘golden’ years. It ain’t much fun having the OAP
    as your only income and being forced to survive from fortnight to fortnight. BUT, you do by watching
    every penny you spend and doing most of your casual shopping at the Op Shops. The single pensioner’s
    $22.7 k is still extremely generous by World standards and us OAPs should be very thankful for it.

    • David medley  

      So we go back to the 50s and no one saves for their retirement and we will all be better off so the govt will be out of pocket even more than ever because when we save enough so as not to require govt funding they want to tax us more than promised how dose that work

  2. Dave Bradley  

    Paying enough tax into government revenue to guarantee a pension and health care in old age is cheaper and safer than having your investments and health totally at the mercy of inadequately regulated heartless corporate profiteers.

    Why do the wealthiest people and corporations think they have the right to not pay tax for infrastructure and services for the society they profit from?

    For instance why do we only get less than 10% of the return from our natural gas that Qatar gets and have our domestic gas prices forced up to subsidise exports? Because governments promote corporate profits and not the future of Australians.

    $22.7 k is still well below the poverty line in Australia with our costs of food and housing and a meaningless if not callous comparison. Compared with developed countries the picture is different. Do we really want to push elderly people, who have contributed all their lives, even deeper into poverty so flippantly

  3. Rhonda De Stefano  

    If only people knew the history behind the pension
    “Menzies was opposition leader when then prime minister Ben Chifley announced a National Welfare Fund to pay for pensions, unemployment relief, child endowments, even health care with a 7.5 per cent tax increase.
    Menzies insisted that the Compulsory Contribution (levy) should be kept completely separate; that it should be paid straight into a trust account and not mixed with the general revenue.The levy and the National Welfare Fund began on January 1, 1946, and contributions were shown separately on workers’ personal tax assessments for 1946, 1947, 1948, 1949 and 1950, with the money paid straight into the special fund from which claims were paid out.
    In 1950 the balance in the fund was almost £100 million or $200 million – in today’s money the equivalent of several trillion dollars. But the pot was too big for the politicians to leave alone. Menzies, supported by the Australian Labor Party, amended the Acts governing the fund so the compulsory contributions levy was lumped in with people’s income tax and the whole lot paid straight into consolidated revenue.But the compulsory 7.5 per cent “levy” was still collected and spent.In 1977 Liberal PM Malcolm Fraser transferred the balance left in the welfare fund account (by then almost $500 million, or several trillion in today’s terms) to consolidated revenue. But still the 7.5 per cent was taken out of everyone’s pay packet every week.Then in 1985 the Labor Government repealed Acts No. 39, 40 and 41 of 1945 (The National Welfare Fund Acts) and introduced income and asset testing, thus excluding millions of levy and taxpaying Australians from receiving the pension for which they had paid.But still the 7.5 per cent levy continued to be collected (while hidden in general income tax revenue.) And to this day it still is collected. ” – Brian Hale, former business editor of Courier Mail and the Australian. The pension is not charity, it is money that working people have already provided for their retirement. Money that should have been available to pay each retiree a $500 a week non means tested pension if it had been left in the fund rather than transferred to general revenue where it was spent!

  4. Jan  

    We feel we are being punished for saving. We should have enjoyed ourselves Instead. We never dined out. We were careful with spending at all times. I would have loved going out for breakfast or coffee at times. But It was always we must save for our old age. What fools we were. In the UK everyone gets a pension and If you have saved money through a work pension you get that on top of the pension.

  5. jaywalker  

    Totally agree, Jan. The UK system is much fairer. Everyone pays in specifically for their age pension (unemployed are granted “credits”) and then everyone knows they will get that basic pension and any more you’ve saved is your own business. Australia tried to do it for 5 years back in the 50s but then changed it back to it all being part of consolidated revenue.

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