The Age Pension and the superannuation system will be thrown under the microscope in a major sweeping review of Australia’s retirement income system, with a focus on how they support Aussies in retirement as well as how they affect the budget as a whole, Josh Frydenberg has confirmed.
The review, which is the first of its kind in three decades, was initially recommended by the Productivity Commission after a damning analysis of the country’s poorly performing super funds earlier this year. It will focus on three key pillars, a means-tested Age Pension, compulsory super and voluntary savings, “including home ownership”.
The independent review will be chaired by former senior Treasury official Mike Callaghan, alongside chair of the Self-Managed Super Fund Association Deborah Ralston and Future Fund board member Carolyn Kay. It will be the first inquiry into the compulsory superannuation scheme since the 1993 inquiry, led by Vince Fitzgerald, which was carried out a year after former PM Paul Keating’s compulsory savings system was introduced in 1992.
According to Frydenberg and assistant minister for superannuation, Jane Hume, the year-long review will look at “the impact of current policy settings on public finances”. It will also “cover the current state of the system and how it will perform in the future as Australians live longer and the population ages”.
Frydenberg added: “The review will establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians.” A consultation paper will be released in November this year and the final report must be provided to the government by June 2020.
The Productivity Commission recommended the review before there’s any increase to the the amount of compulsory super that must be paid to employees. That is currently set to rise from 9.5 per cent to 10 per cent by 2021, before reaching 12 per cent by 2025.
In its report at the time, the advisory body called on the government to cancel the licences of funds which repeatedly underperform for eight years, if they fail to turn things around within a 12-month period. The extensive 722-page publication also recommended that Australian workers be provided with a list of the top 10 superannuation funds to choose from when they start a new job. Australia’s superannuation industry was estimated to be worth around $2.7 trillion at the time.
Frydenberg addressed the report on Twitter at the time, claiming it showed that while the current system is “serving Australia reasonably well”, there are still “significant issues” to address. He added: “@ozprodcom endorsed many of our superannuation reforms that are before the Parliament. It’s time Labor listens to the experts and gets behind our reforms that put the interests of all superannuation members first.”
Advocacy group COTA (Council on the Ageing) responded to the report at the time too, saying it highlighted the “urgent need” for a comprehensive review of retirement incomes. Chief executive Ian Yates said: “COTA has argued for years for a full and independent review of our whole retirement incomes system, which has been supported by the Grattan Institute and many others.
“We need to properly calibrate the relationship between the pension, superannuation, the family home and other savings and income to make sure that they all work together to provide the best outcomes for all Australians when they retire. The workforce and population ageing have both changed substantially since the introduction of superannuation in 1992. After almost 30 years the system needs to adapt but we need to be very careful that addressing superannuation in isolation does not create issues in other areas of retirement income.”
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