A more efficient use of personal assets would allow most people to achieve adequate retirement incomes without increasing the Superannuation Guarantee (SG) to 12 per cent, the Retirement Income Review has claimed.
The final report of the Review, released today by the government, indicated this use of personal assets included accessing equity in homes during retirement and making better use of income before retirement to smooth consumption and standards of living before and after retirement.
“Projections based on maintaining the SG rate at 9.5 per cent highlight that efficient use of savings can have a major impact on the adequacy of retirement outcomes,” it said.
“Efficiently drawing down assets in retirement provides people with the opportunity to save less for retirement and maintain higher working-life incomes.
“Insufficient attention has been given to assisting people to optimise their retirement income through the efficient use of their savings.”
In claiming that most people would achieve adequate retirement incomes at 9.5 per cent, the review noted this would occur when combined with the age pension, but superannuation balances would be lower at all income levels compared with an increase to 12 per cent.
The report stated, “for lower and middle-income earners, retirement incomes would be lower than with the SG going to 12 per cent, but would remain above or within the replacement rate benchmark of 65 to 75 per cent”.
“If these groups draw down their savings in retirement, they could have higher incomes during their working life while still being able to maintain living standards in retirement if the SG stayed at 9.5 per cent,” it added, based on another claim that most people would receive 2 per cent more income over their working lives if the SG rate remained at 9.5 per cent.
According to the review, some higher-income earners would fall below the benchmark replacement rate at 9.5 per cent but would still achieve a level of retirement income that exceeds the Australian Superannuation Funds Association determined comfortable standard.
The report also stated maintaining the SG rate at 9.5 per cent would avoid inequities because SG increases benefit men more than women and “maintaining the SG rate at 9.5 per cent would not contribute to widening the retirement income gap between men and women”.