The Federal Government and Opposition have both overlooked some vital areas in their proposed superannuation changes, according to a report compiled byRiceWalker Actuaries.
According to the report, neither party has come up with a solution to the problem of retirees running down their assets and relying on taxpayers to fund their remaining retirement through the age pension.
As an interim and politically attractive solution, RiceWalker has suggested scrapping the indexing of the current tax-free lump sum amount, while in the long term, proposing retirees be required to use super benefits to purchase a private pension equivalent to the age pension.
It also states that the asset test destroys the incentive to save, as additional retirement income can effectively taxed at more than 100 per cent, but this has not been addressed either under the proposals.
“In a climate where both parties support more saving in the community, it is incomprehensible why this issue is not tackled. A solution is to scrap the assets test altogether and determine a rate of deemed income from each type of asset where the actual income is variable or difficult to determine,” the report says.
RiceWalker supports the Opposition’s proposal of a 65 per cent gross pre-retirement income target for all Australians at age 65, but says that this requires more research.
“The actual setting of a target is a major step. However, there is no supporting rationale that this is the right target or even a reasonable one.”
RiceWalker also has concerns over how government spending will be impacted by demands from an ageing population.
“There is no commentary on forecasts of the effect of any of the measures proposed on the government’s long-term budget position. Further there are no realistic measures to encourage existing workers to put more money into super.
“More could be done now in terms of actual measures which could assist by eliminating anomalies, encouraging more super savings and making the whole retirement income system simpler,” the report says.
