The Actuaries Institute has called on Treasury to ensure the superannuation guarantee (SG) works to cover all Australians, no matter what their employment situation might be.
“Going forward, universal coverage for all workers should be the goal of the SG system, whether people are employees, self-employed or participate as part of a growing gig economy,” the institute said in its submission to the Retirement Income Review.
The industry body warned if this outcome was not achieved, there would be a bigger burden on the age pension with the need for it to support more citizens in their retirement years.
In addition, it recommended the review process address the need for incentives to encourage Australians to remain in the workforce for longer. It highlighted the point that currently if individuals do extend their working years, it is usually through necessity rather than encouragement from the system.
To this point, it shed light on the fact better training programs for older Australians need to be developed if they are to be encouraged to work for longer as the government has already recognised this demographic will require reskilling and currently 80 per cent of workforce training occurs when people are under 21 years of age.
Another area it identified as needing attention is the inefficient conversion of accumulation-phase superannuation into retirement incomes due to an over-reliance on account-based pensions and the lack of risk pooling.
“Modelling shows retirement incomes have the potential to increase by around 15 to 30 per cent by combining an account-based pension with products that insure longevity risk. This comes at the cost of death benefits and a loss of flexibility, but it allows retirees to spend with confidence,” it said.
It also called for the efficiency of the superannuation system to be improved through the prevention of benefit leakage.
“When a person dies, the residual balance of their superannuation account/fund averages around one-quarter to one-third of the starting balance,” it noted.
Finally, it suggested deeper research has to be performed on retirement incomes to allow the government and the private sector to determine if ageing Australians are living well.
Yesterday, submissions from Rice Warner and the Financial Services Council concluded improvements, rather than substantial changes, need to be made to the retirement incomes system.