6 August 2015
It’s time to quantify the goals of superannuation
There has been much discussion in recent days of the high-level objective of superannuation, however, there is a need to provide more detail to this objective and set some quantifiable targets for the system for the next 40 years.
“The purpose of the superannuation system is to give financial confidence to all Australians in their retirement. This means the superannuation system must provide the majority of people with an adequate income that replaces or supplements the Age Pension for most of their retirement years,” explained Pauline Vamos, CEO of ASFA.
“If we are to progress with a review of the system, we must define the terms of the debate and focus on three key areas: ensuring adequate delivery of income stream in retirement; defining the superannuation system’s purpose and understanding what ‘success’ looks like; and improving the system to better align with the principles and goals that underpin it.”
In ASFA’s framework, ASFA believes that success entails meeting the following benchmarks by 2050:
- Less than 20 per cent of retired Australians relying solely or almost exclusively on the Age Pension
- Age Pension expenditure and tax expenditure on superannuation of less than six per cent of GDP
- Australians retiring with an income replacement rate in retirement in excess of 65 per cent
- At least 50 per cent of Australians able to cover their expenditure in retirement and have a ‘comfortable’ retirement lifestyle.
“The parameters of the system need some work if we are to meet these retirement goals,” said Ms Vamos.
“Measures such as increasing the Superannuation Guarantee to 12 per cent as soon as possible and raising the superannuation eligibility age in line with the Age Pension are two such examples. However, to ensure that substantive change is enacted correctly and with minimum disruption to our current retired population, we must decide and act in one holistic process.
“As such, ASFA strongly supports bipartisan legislation on the goals and objectives of the superannuation system in order to frame discussion and policy decisions over the coming years,” concluded Ms Vamos.
More details on ASFA’s proposal for principles and quantifiable goals of the system are attached. A full explanation is provided in ASFA’s paper, The future of Australia’s super: a new framework for a better system, which can be accessed here.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.