In its submission to the government’s consultation on the objective of super, Mercer will propose a “long-term relationship between the age pension and superannuation”, according to the firm’s senior partner, David Knox.
“To do this properly we have to define the objectives of both superannuation and the age pension simultaneously,” Dr Knox said.
“Super should provide an income throughout your entire retirement, it is not intended for wealth accumulation and estate planning.
“We need to lock this into the overall objectives now to ensure an adequate and sustainable retirement income for Australians and to protect against ongoing tinkering.”
Nor is it enough to state that superannuation should substitute or supplement the age pension, Mr Knox said.
“We need a clear and sensible line in the sand as to when it should move from supplementing to becoming a substitute and some rationale and clarity around the rate of substitution,” he said.
“We firmly believe the objectives of superannuation must include a whole-of-life approach, including reference to how longevity risk may be managed.
“Longevity risk is one of the biggest risks facing retired Australians as the length of their retirement is unknown and therefore ensuring their savings last as long as they do is challenging,” he said.
“There are potential short-term gains for the government to have objectives enshrined in legislation, but it is important we don’t lose sight of the long-term opportunity here. It’s a good idea; let’s just make sure we do it properly,” Mr Knox said.
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