Real targets for retirement savings needed
Aiming for an income replacement ratio at 65 per cent in superannuation is the most meaningful, BT Financial Group's chief executive believes.
Speaking at the Trans-Tasman Business Circle on Friday, Brad Cooper said the current super framework needs to be discussed so everyone can understand the purpose of superannuation and measure the system's success against it.
Last year in December, the Financial System Inquiry recommended that the super framework needed to clarify its purpose otherwise super, retirement policy, and regulatory architecture could not deliver the right outcomes.
Cooper said real targets needed to be built for retirement savings as the current benchmark on a comfortable retirement lifestyle only focuses on a relatively subsistent living, and that we need more than that.
"I believe a better measure of superannuation adequacy is the income replacement ratio. That is, the percentage of your final few years' working income that you want to replace in retirement," Cooper said.
"I believe aiming for a replacement ratio of 65 per cent is the most meaningful. This was put forward by a Senate Inquiry in 2002, and I believe it is an achievable target for the bulk of the community."
Cooper said by enshrining on an agreed income replacement ratio it would help the government, industry, and savers as "after all, that's what superannuation is supposed to do. Replace your income."
Cooper noted it was unfair that the poorest super saves were taxed on their compulsory contributions and that it made even less sense that they are taxed on their voluntary contributions.
"If you make less than $37,000 a year, why would you sacrifice income that you pay no tax on and put it in your super where it will be taxed at 15 per cent on the way in?"
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