Retirement income outcomes will continue to be hostage to future general election cycles unless the retirement income system is given clarity of purpose, according to an SMSF technical expert.
Heffron executive director Martin Heffron said differing views regarding the purpose of the retirement income system and its three pillars – the age pension, compulsory superannuation and voluntary retirement saving – were detrimental to the system as a whole and allowed for retirement income to be held hostage in the run-up to elections.
“Given the long-term nature of retirement income planning for the individual and increasing retirement income self-reliance, regular, significant policy changes undermine confidence in the system, leading to poor sustainability of the system and under or over-saving by individuals, and are ethically indefensible,” Heffron said in a blog post on the Heffron website.
The lack of clarity within the superannuation system was a symptom of the wider confusion relating to retirement income, he added.
“If we aren’t clear on what the overall system should be doing, we won’t be able to determine goals for any of its components either,” he said.
“Perhaps the difficulty we have had deciding a purpose for superannuation results from this lack of understanding or agreement on what the retirement income system is meant to be doing as a whole.”
He also welcomed the Retirement Income Review (RIR) as an opportunity to try and resolve the lack of clarity overall.
“Let’s hope the RIR acts as a catalyst for quality community debate in preparation for the decisions we need on this vital element of public policy. Our leaders are letting us down on this one and need to step up urgently,” he said.
“Without it, retirees and pre-retirees are making long-term plans in the dark and without more clarity and certainty, some of them will probably end up there quite literally.”
Last week, the SMSF Association said SMSFs were responsible for a significant portion of the retirement income system and should be given due consideration in the upcoming RIR.