Re-visiting the adequacy debate
By
Christine St Anne
Fri 29 Jan 2010
There is an alternative view to tackling the adequacy debate that goes beyond boosting the superannuation guarantee.
Much has been second guessed about the impending outcomes of the Henry review, but one thing seems certain - the superannuation guarantee (SG) levy will remain at 9 per cent.
The Australian Institute of Superannuation Trustee's chief executive Fiona Reynolds has already warned that 9 per cent won't be enough for many people to enjoy a comfortable retirement.
The view is shared by the bulk of the industry, which have consistently advocated for a 3 per cent lift in the SG.
One chief executive of a super fund, however, recently told me that any increase would most likely hurt businesses and offered an alternative view in dealing with the issue of adequacy.
"Businesses will have to wear the costs of any increase to the SG. You can only milk the tax cow so much before it will fall over completely," he said.
Rather, the super chief recommended people take advantage of boosting their superannuation through tax initiatives such as the co-contribution scheme.
His views are shared by Towers Watson managing director Andrew Boal.
For Boal, the 9 per cent does not need to be lifted. Rather, targeted tax concessions are needed, particularly for middle-income earners.
Boal said the big issue is more about equity in superannuation, already foreshadowed in the Henry review.
"It looks like super concessions for the wealthy may be pared back, which is a good thing as more targeted concessions should be directed at the low to middle-income earners," he said.
In particular, Boal said the 9 per cent SG may not be enough for middle-income earners to retire on as low-income earners were supported by the age pension.
"The co-contribution scheme has proved to be very effective. Expanding such an initiative to include middle-income earners will help boost their super savings, leading to a more adequate retirement," he said.
Quoting research from the World Bank and the Organisation for Economic Co-operation and Development (OECD), Boal said people need 55 per cent of their wage in order to have a reasonable income for retirement.
"Our mandated superannuation environment is already positioned to provide that level of retirement income, particularly for low-income earners," Boal said.
At the end of day, people will adjust their spending habits accordingly to how much money they will have to live on, the super chief said.
"When you get to your seventies you're not exactly going to be flying all over the world. For my dad, he is simply now content to have lunch at the local club."
Unless you are Rupert Murdoch, he does have a point.
|
