An objective for the retirement income system still needs to be defined but broad and ill-defined statements should be avoided, according to the Retirement Income Review (RIR) final report.
The report, which the federal government released today, recognised there is no agreed objective for the retirement income system, or the three pillars – superannuation, the age pension, and voluntary savings – that combine to create it.
“An agreed objective is needed to anchor the direction of policy settings, help ensure the purpose of the system is understood, and provide a framework for assessing the performance of the system,” the report stated.
“While the desirability of having an agreed objective was widely endorsed by stakeholders, there were a range of views as to what should be the objective,” it added.
The final report pointed out it was not the task of the RIR to determine any objective for the system or the pillars and its form had to come from the community and be delivered by government but not open to alterations.
“If the aim is to achieve consistency in the direction of retirement income policy and improve community understanding, the objective should be settled and not be subject to frequent change. For these reasons, it would be preferable if the objective for the retirement income system was legislated,” it explained.
According to the report when an objective was developed it should be around the goal of delivering “adequate standards of living in retirement in an equitable, sustainable and cohesive way”.
“What constitutes an ‘adequate, equitable, sustainable and coherent’ retirement income system needs to be clear and preferably legislated,” the report added, making suggestions for what those terms should cover.
“What this entails needs to be elaborated. Ambiguous, vague statements that are open to interpretation will not give the required guidance,” it said.
For adequacy, the review suggested the retirement income system ensured a minimum standard of living for retirees in line with community standards that could be maintained by those in retirement, and in terms of equity, that the system would support those in need while providing similar outcomes for people in similar circumstances.
With regard to sustainability, the retirement income system should be cost-effective for taxpayers, sustainable and responsive to demographic, economic and social change and should drive cohesion through incentives that smooth consumption, support people in taking responsibility for their retirement income while not becoming too complex for consumers, it suggested.