Last month’s Budget was bad for superannuation on several
counts – particularly the long count up to 67, writies AIST chief executive
offier FIONA REYNOLDS.

67 is not a cool number. It looks like being the
watercooler topic of 2009. At what age do you plan to retire? Ask your work
colleagues this question and very few of them are likely to express a desire to
work until the age of 60, let alone 67 – which is the eligibility age for the
pension that the Federal Government proposes to introduce in stages from 2017
to 2023. Calls to lift the superannuation preservation age from the present
55-60 age threshold to 67 are equally unpopular.

Indeed a recent Age/Nielsen
poll suggests only 40 per cent of workers support a lift in age pension
eligibility and 56 per cent are opposed to it. Speaking at AIST’s post-budget analysis
breakfast in Sydney last month, the Minister for
Superannuation and Corporate Law, Nick Sherry, said Australia’s rapidly ageing
population, coupled with the dramatic increase in average life expectancy,
meant the Government had little choice but to increase the pension eligibility
age.

During question time, Sherry noted that the life expectancy of his nine
year old daughter was over 90 years; that she would probably live until the
next century; and could be expected to enjoy a very long retirement. While
recognising the need to ensure that our age pension system is economically
sustainable over the longterm and doesn’t become an onerous cost burden on
younger generations, AIST remains concerned that raising the retirement age to
67 will impose an unfair burden on many manual workers who find it both
physically challenging to retain work and also difficult to find work past a
certain age.

We believe there are better ways to look at retirement provision –
by encouraging self-provision for those who can afford it and by providing
incentives to delay taking the age pension for those who can work past
retirement age. We are also concerned that lifting the preservation age (one of
several key recommendations in the interim report of the Henry Review released
on Budget night) will see a drift away from superannuation savings. AIST
believes that that the superannuation preservation age should remain
significantly lower than the pension qualifying age to allow flexibility for
those who retire earlier to access their retirement savings.

We know that
generation X and Y already place a high value on a healthy work/life balance.
It’s likely that many in this age group – as well as older workers – will be
reluctant to contribute extra money into super if they have to wait until age
67 to access their money – and let’s not forget (because they certainly won’t)
that super is their money. This could have serious consequences, not just for
people’s retirement income balances, but for the economy as a whole and our
national savings pool.

At the very least, voluntary super savings should not be
preserved to age 67. There were other recommendations and changes announced on
Budget night that are of a concern to AIST. While supportive of the
Government’s move to address some of the inequities in the current
superannuation system, we believe that the new rules on concessional tax limits
could hamper plans for last-minute and much-needed super top-ups among the over
50s. AIST recognises that the existing concessional caps favoured high income earners
and supports the reduction for younger workers who are many years away from
retirement.

However we would like to see the Government either extend the
transition period past 2012 for those over aged 50 or allow this age group a
higher cap, even if not quite as generous as before. And while the interim
Henry Review report has some good recommendations around retirement issues – notably
one single means test, thoughts on better longevity products and integrating health
and ageing – we remain concerned about recommendations for: no increase in the
superannuation guarantee from the current 9 percent; no inclusion of the
self-employed in compulsory super; no removal of the $450 monthly income
threshold and a review to consider further increases in pension eligibility age
– ie beyond age 67 – in 2020.

AIST believes that the Henry Review – which is
set to deliver its final report in December – is a golden opportunity to help
deliver a retirement income system that integrates all aspects of retirement;
is fair and equitable; and sets us on a path that will provide Australians with
confidence and certainty when planning for their retirement years. But we also
need to be mindful that – in this current climate of economic uncertainty and a
fall in voluntary super savings – the danger exists that Australians will turn
away from super if it starts to sound too hard, less attractive and undergoes
too many changes as successive Governments come and go.

 

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