Ditch the proposed super increase and focus on boosting government payments for retirees, experts have advised in one of the latest submissions to the Retirement Income Review this week.
In its statement released on Monday, public policy think-tank the Grattan Institute said lifting the compulsory super will only jeopardise the future of Aussies and create a wider divide between the country’s rich and poor.
Currently, compulsory super requires Aussies to contribute 9.5 per cent of their wages while working to assist them in retirement. However, the government has proposed an increase to 12 per cent by 2050 – a plan which the Grattan Institute doesn’t agree with.
They said the proportion of retirees, particularly those who rent, would be at further risk of falling into poverty in their later years. The institute also claimed that axing the proposal could save the federal budget more than $4 billion a year.
“It [increasing the Super Guarantee] would do little to boost the retirement incomes of many low and middle-income earners,” the submission read. “It would lead to lower pensions for both current and future retirees by suppressing the value of the wage-benchmarked Age Pension.
“Pushing for retirement savings when they are not needed is simply a recipe for larger bequests, leading to widening wealth inequality over time as those unused savings are passed on to future generations.”
Instead, the institute recommended focusing on other aspects of retirement income, such as lifting the Commonwealth Rent Assistance immediately by 40 per cent, boosting Newstart by at least $75 a week, and including more of the value of the family home in the pension assets test.
“Commonwealth Rent Assistance is too low, and the pensions assets test taper is too harsh,” the submission read. “Fixing these policies would do more to boost the retirement incomes of low and middle-income Australians than further Super Guarantee increases. And it would do so without forcing low and middle-income Australians to save for a higher standard of living in retirement than they enjoy beforehand.”
Meanwhile, COTA has also released a submission to the review, with its main recommendation being to simplify the retirement income system. The organisation said it needs to be structured and communicated in a way that is understandable to the older generations and gives them security in their future finances.
COTA also recommended an increase in the Commonwealth Rent Assistance by 40 per cent, and an increase of Newstart payments by at least $75 per week to ensure a fairer system for all.
“The system is overly-complex with complicated, poorly targeted concessions, some of which lead to perverse outcomes,” the submission read. “Among those people who do consciously plan and provide for their retirement there is a constant fear that the ‘rules will change’ in ways that will negatively impact on them. It is hoped that this review can result in changes that will create greater confidence and clarity for older people who have carefully planned their retirement incomes.”