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Single issue focus on retirement income lacks context

retirement income

The retirement income system needs to be reviewed in its entirety, but focusing on single issues is misleading, according to Rice Warner.

Rice Warner has warned against using single issues within the broader retirement income system to avoid addressing the interplay between superannuation, the age pension and tax concessions due to take place in the upcoming inquiry into the system.

The research and consultancy group has also labelled some commentary on the age pension as being poorly researched or presented without context and claimed superannuation will reduce the reliance on the pension.

The comments were made by Rice Warner in an article published on its website last week in which it supported the upcoming review into the retirement system, which was a recommendation of the Productivity Commission inquiry into superannuation.

“It is widely expected that the review will cover at a minimum the ideal level of the superannuation guarantee and integration with other policy settings, including the age pension and distribution of tax concessions. It is necessary for any review to review the relationship between all three pillars,” the group noted while pushing back against recent commentary surrounding the review.

“Unfortunately, most of the public discourse tends to focus on single issues at a point in time,” it said, highlighting recent questions about how high the superannuation guarantee should go, if the means tests prevented saving and if adequate retirement incomes can be achieved.

“This is understandable in the context of the daily news cycle as it is difficult to summarise complex issues (on which experts cannot agree) into a one-page article.

“Commentary on the age pension is notorious for being poorly researched or presented without context.”

It highlighted recent comments from the Grattan Institute as an example of this commentary and stated its own modelling confirms superannuation would reduce the reliance on the age pension.

This would take place as the cost of the age pension was expected to reduce as a percentage of gross domestic product while at the same time the total money spent on state pensions would remain static.

Additionally, the constant levels of compulsory savings would shift the retirement income burden primarily to super with some support from the age pension, the group stated.

“Our system is complicated and often fragmented. Policy changes made in isolation have increased the complexity of the system and undermined confidence in superannuation.  The upcoming retirement incomes review is an opportunity for an integrated approach but will fail if it contributes to the growing mountain of ‘technical debt’ from decades of ad-hoc policy development.”

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