Australians require long-term certainty with respect to how the means test will be applied to the age pension, according to the managing director of Watson Wyatt in Australia, Andrew Boal.
Commenting on Tuesday night’s Federal Budget, Boal warned that some of the tinkering undertaken by the Government with respect to superannuation contributions might ultimately serve to place greater pressure on the age pension.
He said that retirement and longevity were key issues the Government would need to address sooner rather than later, with the latest data from the Australian Bureau of Statistics suggesting that over one million people would retire in the next 10 years.
Boal said it was worth noting that the average age of retirement was expected to increase by five years to 64.
“For the large wave of baby boomers that were born before 1964 and are now age 45 or older, planning for their retirement is a crucial financial decision and what they need more than anything else is certainty,” he said.
“Unfortunately, what we got on Budget night was some partial winding back of the concessional contribution limits that were only introduced a few years ago, and some short-term tinkering with the co-contribution system for low income earners.”
Boal noted that the level of Government matching in the superannuation co-contribution scheme was being pared back in the short term from 150 per cent to 100 per cent for three years, increasing to 125 per cent for two years before returning to the current level of 150 per cent in 2014.
“While this will save money in the short term, it is yet another change that will make it difficult for people to save for their own retirement,” he said.
“This change, however, will have a more direct impact on future Government expenditure, as many people who receive the co-contribution will, as a direct result of these changes, be entitled to higher age pension payments later on.”
