The “2015 Intergenerational Report” has reinforced the urgency around improving policy frameworks for superannuation, as current measures will not sustain the enormous demographic shift facing Australia, industry participants have said.
The report, released on 5 March, predicted that by 2054/55 there would be 7 million Australians aged 65 to 84, compared to about 3.1 million today.
Furthermore, life expectancy at birth is projected to increase from 91.5 years in 2015 to 95.1 years in 2055 for men, and from 93.6 years in 2015 to 96.6 years for women.
SMSF Owners’ Alliance executive director Duncan Fairweather said the report underlined the importance of the announced policy measures, or others of equivalent impact, being legislated.
“If [the government’s] expenditure problem is not fixed, future generations will not only have to fund their own government services, they will be funding the services used by Australians today,” Fairweather said.
“In relation to the retirement system and superannuation, it is disappointing that the majority of reforms regarding the age pension entitlement remain unimplemented as our modelling last year showed the dramatic impact these would have on people’s savings and the federal budget.
“We recognise that the super system has yet to mature, but nonetheless we do not believe that the current system is the best one in the long term for all Australians.”
SMSF Association chief executive Andrea Slattery said the ageing population would create fiscal challenges for future governments in dealing with a society that potentially had lower workforce participation and a higher dependency ratio of retirees to tax-paying workers.
“[The report] certainly reinforces the association’s message that now is the right time to have an informed debate about creating the right settings in our super system to encourage people to forgo income today to have financial security in retirement,” Slattery said.
The SMSF sector demonstrated what could be achieved in terms of retirees acting responsibly, with 93 per cent in the drawdown phase opting to take their savings through an income stream, she said.
“However, there is much more to be done to encourage lesser dependence on the age pension as the report projected only a small reduction in reliance on the pension,” she said.
Xpress Super and SuperGuardian chief executive Olivia Long said the report emphasised the need for a bipartisan approach across the political divide in order to achieve the right policy settings.
“And, as far as possible, remove super from the political cycle,” Long said.
“Quite clearly we cannot afford to wait 40 years to tackle an issue that is on our doorstep now.”
