IFSA releases super adequacy report
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The Investment and Financial Services Association (IFSA) has repeated its call for a lifting of the superannuation guarantee to 12 per cent in light of the findings of superannuation adequacy research it has commissioned.
IFSA chief executive John Brogden said the research, undertaken by Rice Warner Actuaries, represented a “confronting reality check” as it revealed that the retirement savings gap had increased from $452 billion in 2004 to $695 billion, an increase of $26,000 per person.
“It is clear that the current super guarantee must be raised to at least 12 per cent if people are to have any chance of a comfortable retirement,” Brogden said.
However, he emphasised that the 12 per cent increase should only be the first step in measures adopted by the Government to address the shortfall.
“The Federal Government will have to consider other incentives in this area to encourage further investment in superannuation if Australia is to avoid a savings gap disaster in the future. Greater flexibility in the area of concessional contributions caps would greatly assist. Alternatively, much of the shortfall is going to have to somehow be funded out of future government revenue.” Brogden added.
The IFSA report was released ahead of the next Treasury Intergenerational Report, due to be released today, which looks at the implications of demographic change for economic growth and the financial implications of continuing current policies and trends.
The IFSA report stated that when it came to increasing the SG, employers should not bear an additional SG levy.
“But a process of soft compulsion (say, 3 per cent employee contributions introduced over a five-year period) together with the Government co-contribution payments for low-income earners would go some way to providing a comfortable retirement for all,” the report stated.
In response to the Henry Review recommendations, IFSA argued against the raising of the age pension to 67.
“An alternative approach might have been to raise people’s retirement incomes during their working life by raising contribution rates and increasing workforce participation between the ages of 55 and 65 (where one in six men is on a disability pension). These measures would be far more beneficial for members and society alike,” the report stated.
It also added that the recommendation that means testing be simplified by eliminating the assets tests and shifting to a single test based on income would be complex from an administrative point of view and would cause significant intrusions upon pensioners.
The IFSA report also looked at what factors affect adequacy, such as mortality rates, marital status, age pension eligibility, home ownership, age at retirement, expenditure patterns and drawdown patterns.
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