The superannuation industry peak body has called out the Grattan Institute for launching an unprecedented attack on the retirement savings of ordinary Australians.
“This report is about two Australias, where the well-heeled high earners have a fully funded retirement and the rest rely on the state,” Association of Superannuation Funds of Australia (ASFA) chief executive Martin Fahy said in response to the Grattan Institute report’s release today.
“The Grattan Institute wants to dismantle our world-class retirement funding system and replace it with a model that has two-thirds of the population relying on the age pension.
“In a world where there are broken work patterns and where women’s balances are 40 per cent less than men, Grattan wants to leave large parts of our society exposed to poverty in retirement.”
Fahy said the analysis sets an extremely low bar for adequacy, seeing the Henderson poverty line as relatively generous.
The “Money in retirement: more than enough” report said the vast majority of retirees today and in the future are likely to be financially comfortable, while also calling for the increase in the super guarantee to be scrapped.
The report found retirees are less likely than working-age Australians to suffer financial stress, such as not being able to pay a bill on time, and more likely to be able to afford optional extras such as annual holidays.
Grattan Institute modelling shows that, even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income, well above the 70 per cent benchmark endorsed by the Organisation for Economic Co-operation and Development and more than enough to maintain pre-retirement living standards.
Further, it said many low-income Australians will get a pay rise when they retire through a combination of the age pension and their compulsory superannuation savings.
“Australians tend to spend less after they retire and even less into old age,” the report said.
“Their medical costs increase but are largely covered by the taxpayer.
“Many retirees are net savers and current retirees often leave a legacy almost as large as their nest egg on the day they retired.”
However, the retirement incomes system is not working for some low-income Australians who rent, particularly in Sydney and Melbourne, it noted.
“This problem will get worse because on current trends home ownership for over-65s will decline from 76 per cent today to 57 per cent by 2056,” it said.
It recommended that in order to boost retirement incomes for the poorest Australians, the maximum rate of commonwealth rent assistance should be increased by 40 per cent, worth more than $1400 a year for a single retiree.
Loosening the age pension assets test could also lift retirement incomes for around 20 per cent of retirees today, rising to more than 70 per cent of retirees in future, it said.
It would also deal with anomalies in the system: some people who save $100 while working increase their total retirement income by less than $100 in real terms, it said.
“But because most Australians will be comfortable in retirement, there is no need to boost retirement incomes across the board,” it said.
“The legislated plan to increase compulsory super contributions from 9.5 per cent to 12 per cent should be scrapped, saving the budget about $2 billion a year.
“And super tax breaks and age-based tax breaks should be reduced to ensure the retirement incomes system does not become an excessive burden on future budgets and endanger funding for aged care and health.”
