Superannuation experts have urged the government to give a broader scope to its retirement system review as the current system has too many shortcomings.
Dr David Knox, Dr Anthony Asher and Michael Rice are all authors of the Actuaries Institute’s green paper, Options for an Improve and Integrated System of Retirement, and argue that the current system is complex, contains anomalies and produces perverse incentives.
The report said that retirees need access to a regular income stream, savings to cover unexpected expenses and protection against longevity, inflation and market risks.
There should not be incentives to “game the system” and it should be simple for retirees to understand without the need for advice.
Options for reform reviewed by the report include simplifying the age pension, addressing anomalies, embedding automatic adjustments in the super preservation age to reflect changes in longevity and setting targets for expenditure for support in retirement.
Actuaries Institute’s chief executive Elayne Grace said the overarching objective of the retirement system should be to ensure Australians can confidently live their retirement years in dignity.
“The best system would take an integrated view across all sources of income and expenses for retirees. This includes the age pension, superannuation, the family home, aged care and health costs,” said Ms Grace.
“The current system, though world-leading in some respects, falls well short of that.”
The green paper argued that now was the time to start the debate around retirement, lest Australia falls behind.
“If it does not, Australians may lose the opportunity presented by the fiscal headroom of the declining age pension costs, and the lead time we have to prepare for known longer term changes, such as those to patterns of home ownership and work, longevity and growing health and aged care costs,” said the paper.
Many of the reform options could be achieved by a simpler age pension means test said the report, with a universal age pension and even an option to allow retirees to buy the pension.
Actuaries Institute president Nicolette Rubinsztein said the initial discussion of reform should be kept at a high level to identify the options that have enough support to go further.
“There are a number of known longer term trends: an ageing population, a maturing superannuation system, changing patterns of home ownership and work, a growing dispersion of wealth and health, and growing private costs for health and aged care,” she said.
“All of these will aggravate the inconsistencies that stem from a lack of appropriate integration between the various components and undermine the potential for a dignified life for all retirees.”
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]
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