As the Retirement Income Review’s final report was due to be handed to Treasurer Josh Frydenberg this week, Rice Warner has pushed for the superannuation guarantee increase to go ahead despite rising opposition.
An analysis from the actuary has noted that the current legislated rise of the superannuation guarantee (SG) from 9.5 per cent to 12 per cent in 2025 “will be needed”, particularly after accounts have been raided during the early release scheme.
The rise has been in dispute, with Liberal backbenchers calling for the rate to be frozen ahead of its scheduled increase to 10 per cent next year.
In its submission to the Retirement Income Review, Rice Warner stated the current SG rate of 9.5 per cent reduces to less than 6.4 per cent after deduction of taxes, fees and life insurance premiums.
Previously, the consultancy has recommended the optimum level of SG as being in the range of 10 to 15 per cent of wages.
“The government stated in its terms of reference that it is important that the system allows Australians to achieve adequate retirement incomes, is fiscally sustainable and provides appropriate incentives for self-provision in retirement,” Rice Warner stated.
“So, we want more people to be self-sufficient in retirement (which usually means having more superannuation) whilst keeping the tax support at a sustainable level.”
The review was set to examine the three pillars of retirement income: superannuation, the Age Pension and voluntary contributions, with its panel tasked with setting the fact base for future policy.
Rice Warner noted that “surprisingly”, there is no underlying objective for the super system after the Financial System Inquiry in 2014 recommended a primary objective “to provide income in retirement to substitute or supplement the Age Pension”.
The objective went to Parliament but lapsed last year.
However, the system covers more than just retirement income, as noted by the analysis, with its provision of life insurance and the recent early release scheme.
Senator Andrew Bragg recently stated that an objective for the government and the system should be to decrease the projected numbers of people receiving the Age Pension, also noting superannuation could serve a larger role to raise levels of home ownership.
“We need clarity around the purpose of superannuation beyond the FSI suggestion if superannuation is to continue to provide these ancillary benefits,” Rice Warner stated.
But change will have to be instigated carefully, Rice Warner commented, noting “we don’t want to move from an efficient wholesale system back into a retail structure with high distribution costs where the potential cost savings from competition are consumed by the increased costs of marketing.”
“We expect it will highlight areas of strengths and weaknesses,” Rice Warner stated.
“There will be much to ponder and no doubt more legislation to follow.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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