Today, the Grattan Institute launched an unprecedented attack on the retirement aspirations of ordinary Australians. In a wide ranging report they called for an increase in the retirement age to age 70, a 15% tax on retirement savings, and regulations that would potentially force people to sell their homes to fund retirement.
“This report is about two Australias, where the well-heeled high earners have a fully funded retirement and the rest rely on the State,” said Dr Martin Fahy, CEO, Association of Superannuation Funds of Australia (ASFA).
“The Grattan Institute wants to dismantle our world class retirement funding system and replace it with a model that has two thirds of the population relying on the Age Pension,” said Dr Fahy.
In a world of increasing longevity, and rising health and age care costs, Grattan is proposing that we save less for our retirement. It wants to postpone the move to increase the Superannuation Guarantee to 12% and instead, put the burden of retirement onto future tax payers.
Superannuation is a long-term savings vehicle and provides a solution for the problems of the decades ahead, not just now. The ratio of workers to retirees will halve from around 4.5 people today to 2.7 people by 2055. Without superannuation, the reality is that retirement will be unaffordable in 30 years’ time.
Superannuation is a system that is still maturing, with the average balance for men currently around $112,000 and women around $68,000, but for many Australians it is a long way from what is needed to deliver the needs of age care, health and other costs in retirement.
Grattan’s solution is for more Australians to rely on the State and for living standards to substantially decline in retirement.
“In a world where there are broken work patterns, and where women’s balances are 40% less than men, Grattan wants to leave large parts of our society exposed to poverty in retirement.
“That would be a world where only the few can afford health insurance and where retirement is a dreary replay of the 1950s.”
The Grattan analysis sets an extremely low bar for adequacy, seeing the Henderson poverty line as relatively generous.
The fact is that the great bulk of Australians want and need a retirement lifestyle in line with the ASFA comfortable level. That is why the ASFA comfortable standard has resonated with the Australian population.
Spending $43,000 a year for a single person and $60,600 a year for a couple, does not make you rich.
“The ASFA Retirement Standard provides a detailed account of living expenses in retirement.
“The Grattan analysis in effect wants people in retirement not to have heating in winter, not to take vacations, to get rid of the car, and skimp on prescriptions and other out-of-pocket health care costs,” concluded Dr Fahy.
For further information, please contact:
Katrina Horrobin, 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. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.