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.