Financial experts believe Australians aged over 60 would be better off with a universal pension, rather than our current superannuation system.
According to economist Geoff Carmody, who was previously a senior officer with the Commonwealth Treasury, a universal pension would be cheaper and fairer for everyone.
“An age pension for all is a… more efficient option than the present means-tested age pension, plus compulsory super or tax concessions”, Mr Carmody explained.
A universal pension would overcome the “cluster of tax breaks” often associated with superannuation, Mr Carmody claimed. One pension to fit all could be a cheaper solution too.
“The current pension-plus-super system costs about $74 billion now”, Mr Carmody said. “An age pension for all would cost $68 billion”.
The Aussie economist also believes that a universal pension would be fairer. The idea “breaks the link between paid employment and retirement income”, Mr Carmody said.
A universal pension could eliminate any bias against women or Australians who have limited employment histories. It could also empower over-60s to stay in the workforce for longer.
“The current means-tested pension imposes an effective marginal tax rate (EMTR) barrier discourages pension-age people from continuing to work”, Mr Carmody said.
“There’s much lip service about the need to increase workforce participation among older people”, Mr Carmody explained. “A universal age pension eliminates this disincentive to continue working”.
Mr Carmody also believes a universal pension would be simpler. There’d be “no need for costly bureaucracies administering complex means tests, with which pension-age people need to comply”.
“On Wednesday, the government launched a discussion paper on the enshrining of a formal objectives of compulsory super in law”, Mr Carmody added. “But isn’t there a better way?”