7 July 2015
PC Report confirms changes to super should be minimal and well considered
The Association of Superannuation Funds of Australia (ASFA) says the Productivity Commission’s (PC’s) report released today confirms that there is no urgency to make changes to superannuation immediately, and that any changes need to be part of a holistic review.
“The superannuation system is operating well, and is already reducing the cost of the Age Pension by $7 billion a year. The proportion of people expected to receive the full pension has fallen from 44 per cent in 2000 to 25 per cent, and will fall to 22 per cent by 2023,” said ASFA CEO, Ms Pauline Vamos.
The PC’s analysis has stated that Australians are prudent with their superannuation savings, which is consistent with previous research, helping debunk the myth that people quickly spend their superannuation.
“It is a myth that people take a lump sum and blow their superannuation the day they retire. The truth is 83 per cent of superannuation assets are taken as an income stream at retirement and, as the system matures, this number is likely to reach 96 per cent by 2025,” said Ms Vamos.
Ms Vamos also believes the PC’s research on raising the preservation age is also a valuable contribution, and outlines the problems of retaining mature workers in the labour force.
“At present, the gap between the Age Pension eligibility age and the preservation age gives rise to a risk that people will deplete their superannuation savings and then fall back on the Age Pension. This reduces the positive impact of superannuation on an individual’s quality of life in retirement and reduces the savings to the government.
“Ideally, the preservation age would be linked to the Age Pension age, and would be set to be five years less than the Age Pension age, but capped at 62 years of age. If this were done then the preservation age would increase automatically, and in synchronisation with the Age Pension eligibility age.
“Consideration needs to be given to those older Australians who, for a range of reasons, including restricted abilities due to health issues and a lack of employment opportunities, may find themselves unable to find employment, or sufficient employment. For these reasons, the preservation age should be capped at age 62,” Ms Vamos said.
The PC has also identified some gaps in the system, in particular those who have broken work patterns. “There needs to be greater flexibility in the system to allow those with broken work patterns to catch-up and this should be considered as part of the Tax White Paper process.
“Any reforms need to be considered as part of a holistic review of the system, and the Tax White Paper process provides that opportunity, and reflects the detailed goals of the superannuation system,” she concluded.
For further information, please contact:
ASFA Media Unit, 0451 949 300.
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.