Federal Government to review retirement income system

The Minister and Senator state that this review will ensure Australians are well-supported during their retirement.

The Productivity Commission recommended the review of the retirement income system in their report, Superannuation: Assessing Efficiency and Competitiveness, which was given to the Government in December 2018.

Minister Frydenberg and Senator Hume say the review will look at three pillars of the current retirement income system. The pillars being the Age Pension, compulsory superannuation and voluntary savings.

“In doing so, the review will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages,” says Minister Frydenberg and Senator Hume.

“Through its work, the review will establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians.”

Three people have been chosen for the independent panel. They are:

• Chair of the panel is Mr Michael Callaghan AM PSM, former Executive Director of the International Monetary Fund and former Senior Treasury official

• Ms Carolyn Kay, over 30 years’ experience in the finance sector across international and national roles and is a member of the Future Fund Board of Guardians

• Dr Deborah Ralston, Professorial Fellow in Banking and Finance at Monash University, member of the Reserve Bank of Australia’s Payments System Board, and chair of the Alliance for a Fairer Retirement

The aim of the retirement income review is to identify how the current system is supporting Australians in retirement.

This includes whether the role of each pillar is supporting Australians through retirement, the overall impact across the population and over time, and the impact of current policy settings on public finances.

Minister Frydenberg and Senator Hume say, “It is important that the system allows Australians to achieve adequate retirement incomes, is fiscally sustainable and provides appropriate incentives for self-provision in retirement.

“The review will establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians.”

Consumer peak body, Council on the Ageing (COTA) Australia, is happy to hear the Government is implementing an independent review of the retirement income system.

Chief Executive of COTA Australia, Ian Yates, says he has been asking for a retirement income system review for five years.

He believes the current framework does not produce the best outcomes for older Australians and he hopes the review will result in an overhaul of the system that will meet the needs of the ageing population and the challenges they face in retirement.

Mr Yates also points out that the scope of the review is broader than what the Productivity Commission had suggested, with the age pension, superannuation and private savings included in the review.

“COTA has long called for an independent review that aims to secure comfortable retirement incomes for all older Australians,” says Mr Yates.

“Our current system is failing too many and has not evolved with our changing economy and demographics, as well as being unsustainable. 

“This review isn’t simply about one or two issues, like whether 12 percent superannuation guarantee is adequate or excessive, or whether the pension asset test taper is correct. 

“These individual issues need to be viewed within a more comprehensive, outcomes-focused framework. 

“The retirement incomes system is complex. Many older Australians do not rely on a single income source but draw on a variety of resources to support themselves. 

“This is an opportunity to step back and examine the system holistically and ensure that government policies are helping the greatest number of Australians achieve a comfortable retirement at a reasonable cost to taxpayers.”

Mr Yates was also pleased to see a focus on distributional impacts of retirement incomes policy.

With the final report being received by Government next year, COTA hopes this will provide enough time for a policy response to be implemented in the 2021 budget.

Mr Yates says, “The government must be open-minded and learn from these independent experts about how best to support older Australians. This review is a big first step in the right direction. 

“I look forward to working with the review, to the review’s consultation paper and final report and to working with the government to implement a system that will help secure a dignified retirement for all.”

The first consultation paper is expected to be released in November 2019 with the final report handed to Government by June 2020.