Aged Care, Superannuation

Call for super to fund aged care

Superannuation Aged care funding Aged Care Financing Taskforce

A government-appointed taskforce has recommended those with higher superannuation balances should fund their aged-care requirements as this is consistent with the objective of super.

Older Australians with higher levels of superannuation should use those funds to pay for aged care to lighten the burden on working Australians and avoid tax increases to fund public expenditure in this area, according to the final report of a government-appointed taskforce.

The Aged Care Financing Taskforce, chaired by the Aged Care Minister Anika Wells, recommended that “It is appropriate older people make a fair co‑contribution to the cost of their aged care based on their means” as part of its final report released today.

In making that recommendation, the taskforce explicitly referenced super, noting: “Generally, older people are expected to be wealthier than their predecessors, largely due to the maturing superannuation system.”

The report added the proportion of people over 65 who would access the age pension would fall by around 15 percentage points by 2062/63 and of those receiving a pension, fewer would receive it at the full rate due to the increased accumulation of income and assets.

“These superannuation trends, combined with high asset wealth through the family home and other investments, mean increasingly people still have accumulated wealth and income streams when they need to access aged-care services,” it stated.

“As a result, there is more scope for older people to contribute to their aged-care costs by using their accumulated wealth than in previous generations.”

The taskforce pointed out this was consistent with the government’s proposed objective for super and “income from superannuation should be drawn down in retirement to cover health, lifestyle, other living expenses and aged-care costs”.

In making the recommendation, it said the government should maintain its central role in funding aged care, but not increase taxes on younger workers to do so, noting again that superannuation should be the source of any individual contributions to aged-care funding.

“There are substantial intergenerational equity issues in asking the working-age population, which is becoming proportionally smaller, to pay for these services. Moreover, superannuation has been designed to support people to grow their wealth and fund the costs associated with retirement, including aged care,” it said.

Association of Superannuation Funds of Australia chief executive Mary Delahunty welcomed the wider report, which made 23 recommendations, but noted the reliance on super required it to be protected from proposals to withdraw it for other purposes.

“Even with a maturing superannuation system, many individuals will have only modest superannuation balances when they are in their 80s and 90s,” Delahunty said.

“The superannuation guarantee going to 12 per cent and there being no further widespread early release of superannuation, such as for housing deposits, will be crucial for future retirees to meet their living expenses, including for aged care when appropriate.”

The government has yet to respond to the recommendations and is expected to do so in the May budget.

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