Retirement reforms unnecessary

Retirement income system

The latest submissions to the Retirement Income Review have deemed major system reform unnecessary.

Submissions to the Retirement Income Review from an actuarial firm and an industry body have called for improvements to be made to the system rather than major reform.

Rice Warner expressed its opinion that more efficient and effective outcomes were required from the system, but cautioned against changing one aspect in isolation.

“The Australian superannuation system depends on the three pillars of the age pension, compulsory superannuation and voluntary superannuation,” the actuarial firm said.

“Consequently, the impact of any proposed changes will need to be considered carefully because changes in one area can impact on the others.

“For example, adjusting the taper rate on the age pension will determine how much pension is lost from higher superannuation benefits.”

It recommended the government look at five main elements of the system, including the provision of financial advice that currently cannot be delivered in a cost-effective manner, a mechanism to facilitate joint accounts for couples or have their accounts linked, and a way to simplify administration and documentation requirements.

Other matters it highlighted for reassessment were the establishment of default products and the ability for individuals to move their pension accounts from one super fund to another, as well as the role life insurance plays within a superannuation fund.

Financial Services Council chief executive Sally Loane echoed Rice Warner’s sentiments, saying: “The focus now needs to be on how to improve the system, make it more efficient and effective, and end the scourge of multiple funds created by our inefficient default system. This needs to be implemented as a matter of urgency by making sure people can default once and carry their fund from job to job like they do with their bank account or tax file number.”

Among the recommendations the industry body made were the need for the objective of the superannuation system to be properly defined, offering support for an increase in the superannuation guarantee levy to 12 per cent and the need for key reforms to improve consumer outcomes.

Other items it called for were the need to ensure the current taxation of superannuation is fair and to confirm the retirement savings system does reduce the public’s reliance on the age pension.

Last week, submissions from the SMSF Association and the Self-managed Independent Superannuation Funds Association called for SMSFs to be given proper consideration in the review and for no negative consequences to result from the process respectively.

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