We have submitted our recommendations for a fairer, more equitable system to Treasury.

There has been no comprehensive review of Australia’s retirement system in over two decades. To address some concerns, the Government set up a panel to review the ‘three pillars’ of our retirement system:

  • The Age Pension
  • Compulsory super savings
  • Voluntary savings, including extra contributions to super

Each of these pillars, and how they interact over time, underpin the type of life each generation of retirees can afford to live.

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While all this may sound dry, it’s actually a critical moment for the industry, and the outcomes of the Review could potentially affect all Australians – the tax we pay, the amount we save and the level of compulsory contributions.

As a large super fund, we prepared a submission for the review panel. This sets out our recommendations for a fair, adequate and affordable superannuation system.

Why is the review necessary?

Since superannuation started in 1992, there has been a dramatic shift in Australia’s population. People are living longer, more workers are retiring as renters, and for those who do buy property, many of them are still paying off mortgages when they retire. The review will look at the current state of the system and how sustainable it is in the future as we live longer and the Australian population ages.

Some of the key issues the Review will cover are:

  • What is an adequate retirement income?
  • Is 12% (the current legislative target) the right level of salary contribution to provide that adequate retirement income?
  • What is the extent of the gender gap in super and how is it best addressed so super is fair for women and men?
  • The role of the family home in retirement income
  • The increasing number of people renting in retirement
  • Should annual contribution limits be replaced by lifetime limits?
  • Are the tax settings for super fair and equitable?

What are some of our key recommendations?

  1. Commitment to the legislated increase of salary payments (super guarantee contributions) from 9.5% to 12% by 2025.
    The continuity and level of contributions matters significantly to savings and therefore to income in retirement.
  2. Better reforms for lower income groups, including:
    1. Removing the $450 monthly threshold for paying staff super.
      At the moment, employers don’t have to pay super to staff if they earn less than $450 from their employment each month.; and
    2. Expanding the Low Income Superannuation Tax Offset (LISTO), a government superannuation payment to support people with low incomes.
    Removing the threshold will ensure low income earners and people with multiple jobs get all the super they can get. Increasing the LISTO payment will help low-income earners save for retirement. Both measures also indirectly support women who are generally lower paid and take breaks from the workforce.
  3. Simplifying the superannuation system through accessible advice and guidance, including safe digital advice. Advice could be streamlined and more accessible, suitable for members to dip in and out of when they need it - so people get the right advice at the right time.
    Providing members with timely, simple advice and guidance is critical to establishing long-term savings. However, there are complex rules and regulations around super and the advice industry is geared towards high net worth individuals. Advice for CentreLink support and other important services is complicated and costly, and often hard to access for the people who need it most.
  4. Reducing the taper rate. The taper rate is used to target the level of age pension support at those who most need it, so that retirees with more wealth derive their income from these assets.
    We believe the Age Pension assets test has cut too deeply into the retirement incomes of people with more modest super balances. The group that is retiring now, in particular, is being hurt by the taper rate as super has only been accrued for half of the careers of the people in this group (mandatory super only started in 1992).

The Review is ongoing and currently considering all submissions, including ours. It will report to government on 30 June 2020 and we will keep you informed of the outcomes.

You can read about all our recommendations in the full report.