The current nature of Australia’s retirement income stream system is adequate in providing support to retirees but more work needs to be done in setting a clear objective for the system to guide future government policy, according to the latest review of the system.
The Retirement Income Review (RIR) Final Report, which was released today by the federal government, also suggested superannuation and retirement incomes could be boosted without a further increase in the superannuation guarantee (SG) contribution rate.
Treasurer Josh Frydenberg released the final report and in a joint statement with Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume, noted “the Australian retirement income system is effective, sound and its costs are broadly sustainable”.
“The review makes three over-arching observations about the system. Firstly that the three pillars of the existing retirement income system, being the Age Pension, compulsory superannuation and voluntary savings, continue to provide effective support to Australian retirees and are sustainable in the long term,” the ministers said.
“Secondly that there is a need to improve understanding of the system so that all Australians can make the most of their assets in retirement.
“Thirdly, that the system would benefit from a clear objective in order to guide future policy and provide a framework for assessing its performance,” the government statement noted.
They added while compulsory superannuation assisted middle income earners to smooth income over their lives and helped them save for retirement, more efficient using of those savings could have a larger impact on improving retirement income than increasing the SG.
“There are a number of ways that individuals can significantly boost their retirement incomes without having to increase their superannuation contributions, including more effectively drawing on superannuation assets, achieving better-after-fee returns and accessing equity in their home.”
The joint statement also questioned whether an increase in the SG was beneficial claiming, “the weight of evidence suggests an increase in the SG rate will result in lower wages growth, impacting standards of living.”
The report was described as a “fact base that will improve understanding of how the retirement income system operates” and would not only inform public policy but also shape the policy direction being pursued by the government with regard to increasing the efficiency of the superannuation system and lifting home ownership rates.
“The government will continue to carefully consider the observations made in the review together with the findings of related reviews including the Aged Care Royal Commission and remaining recommendations of the Productivity Commission’s report into Superannuation,” the ministers said.