TheInvestment and Financial Services Association(IFSA) has issued the Government with a stern warning that any reluctance to reform Australia’s retirement incomes system will create an entire generation of discontented retirees, with serious political ramifications.
In a submission to the Senate Select Committee on Superannuation, released yesterday, IFSA said most people would require between 75 and 80 per cent of their pre-retirement income in order to live the type of life in retirement that they expected.
But, according to the association, the current compulsory superannuation regime, even after 30 years of saving, will only leave individuals with 65 per cent of their pre-retirement income to retire on.
According to the association, such failure to meet retirees’ expectations may result in future Government’s making retirement incomes policy on the run as they come to the stark realisation that most people will not have enough money to retire on.
Instead, IFSA has called on the Government to consider appropriate policy responses immediately, including a higher level of compulsory superannuation contributions, increased incentives for individuals to make voluntary contributions to superannuation and cuts to the tax on superannuation contributions.
“We can adjust policy settings … which will increase the amount people save up until retirement, and secondly, we can adopt policies which will make sure those savings go as far as possible in retirement,” IFSA chief executive Lynne Ralph says.
Ralph says the Government could also play a more significant role in eliminating some of the complexities surrounding superannuation and retirement incomes, including removing some of the restrictions retirees have on investing non-superannuation savings into retirement income products.
“It is complexity which makes superannuation hard to understand and costly to administer. Various superannuation rules no longer make sense, and could easily be simplified to reflect real life experiences,” Ralph says.
IFSA has also used its submission to renew its call for the Government to consider its proposal for a new type of complying income stream, the growth pension.
The Government announced at the last election that it would examine IFSA’s growth pension proposal, but has since refused to set out a formal timetable for the review.
