Australians are not getting enough value from the superannuation system considering the amount they have invested, argues Financial System Inquiry (FSI) chair David Murray.
Speaking at the launch of an Actuaries Institute white paper titled For Richer, for Poorer yesterday, Mr Murray said that the issue of value within the superannuation system needs to be addressed.
“We would not want to get to a situation where Australians themselves give up on the value of their own superannuation system,” he said.
Mr Murray said that the system is over-politicised, which leads to poor levels of engagement.
“The distortions in the system politicised it more than is necessary and this caused stop-start changes to the system, which added complexity to the system over the years," he said.
Mr Murray also indicated that it’s not possible to look at the system without taking into regard the age pension, welfare system and the amount needed for an adequate retirement.
“We will not increase engagement and confidence with the superannuation system without a comprehensive view which takes into account all of those factors,” he said.
The Actuaries Institute white paper – prepared by Rice Warner on behalf of the Actuaries Institute – reinforces the key recommendations made by the FSI.
Commenting on the report, Actuaries Institute chief executive David Bell said there are key areas of concern, particularly in regards to intergenerational wealth and gender discrepancies.
Mr Bell indicated that ‘middle Australia’, or those within the fiftieth percentile wealth bands, are at risk of paying higher taxes to fund current and future retirees.
“This in turn reduces their capacity to save for their own retirement.
“This risk could be exacerbated by the risk that they receive less social security support when they retire. In addition they are not guaranteed the growth in property values experienced by retirees,” Mr Bell said.
Moreover, the report outlined that women are continuing to fare far worse than men when it comes to retirement.
For single women currently aged 30 and within the fiftieth percentile band for wealth accumulation, the age pension will account for 56 per cent of wealth. This is compared to 36 per cent for men.
Single males are expected to have an average retirement income of $49,000, while a single woman's income is expected to be $38,000 – over $10,000 worse off.
“The question which obviously arises is whether this is an acceptable outcome both now and in the future,” Mr Bell said.
Mr Murray concluded that since the launch of the FSI, attention has been directed to the superannuation system.
"I think it spawned a higher level of debate, I think we have called out this problem of politics and superannuation which is for the longer term, very healthy and so that is a very good thing," said Mr Murray.
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