In a submission to the Financial System Inquiry, UniSuper argued retirees with balances under $150,000 could be equally well served by holding their money in banks accounts or term deposits.
“For those with lower balances, the tax and social security concessions are reduced by the combination of the Senior Australians Tax Offset and income-free areas under the Social Security rules,” said the submission.
“These two concessions mean that lower balances are typically neither taxable of income tested anyway, so a post-retirement product might add little more than increased costs.”
Consequently, UniSuper believes it would therefore be of greater benefit to assist people in increasing their account balances rather than introducing mandatory retirement income stream products.
According to UniSuper, the biggest influences on the size of a person’s retirement savings is the volume of contributions to superannuation and how retirement funds are invested.
“We think, therefore, that encouraging contributions has the long-term effect of encouraging the take-up of post-retirement products as retirees will have larger balances and will benefit more from these products," it said.
The submission argued that the halving of the concessional contributions cap in the 2009 budget has “resulted in many people questioning the value of contributing to superannuation".
“We think it is important that policymakers revisit the issue of caps on contributions in light of the fact that, long term, these tax concessions have the benefit of reducing reliance on the age pension,” the document said.
