It’s nearly impossible to have a quality debate about the fate of the superannuation guarantee in media, but as the SG issue is a component of the Retirement Income Review we need a high quality, research-driven approach.
Here are the criteria I use when reviewing research on this topic. It is rare that a single piece of research ever ticks all the boxes. This doesn’t mean it is necessarily poor research – it may contribute to the mosaic of information brought together:
- Clearly defined objective for retirement outcomes. For me financial needs in retirement include (at a minimum) accommodation and income for consumption (there is a strong case for also including aged care and healthcare). This probably doesn’t sit easily with policymakers because housing, superannuation, age pension and taxation don’t all sit within one government portfolio.
- A clear definition of what is incorporated in the assessment of retirement outcomes. While it is now broadly accepted that we need to include both superannuation and the age pension, should the assessment also include other savings (as considered by the Grattan Institute) and imputed reverse mortgage income for homeowners (flagged by Grattan)?
- Consideration of working life experience relative to retirement outcomes. A point is reached where one oversaves, impairing present living standards relative to the likely retirement experience. This is all part of the economic framework of lifecycle theory. You need to be careful how retirement standards are used in this type of analysis. They are informative and can be a valuable engagement tool but any analysis still needs to consider living standards during working life.
- Stochastic (consider the distribution of possible outcomes) not deterministic (a single point estimate of the outcome) thinking. While some may consider this highbrow, it is essential: can informed policy decisions be made without understanding the range of outcomes Australian’s may experience in retirement.
- Cohort assessment. The research needs to consider how well any policy solution works across different cohorts of the population, including but not limited to combinations of age, gender, household structure, health and disability status.
- Acknowledgement that the SG level is not the only retirement policy tool available. Rental assistance, home equity release, and age pension design are just some of many possible policy levers. They may be more targeted and cost less.
The above six points primarily focus on consumer outcomes. The Retirement Income Review looks through a higher order framework, which maps reasonably well:
- Adequacy – captured in the above framework.
- Equity – assessing whether the system produces fair outcomes for different groups of Australians. This is partly explored through cohort assessment. Additionally, the concept of equity considers issues such as the fairness of the tax and transfer system, and intergenerational equity.
- Sustainability – assessing the ability of the system to meet present and future demands (again intergenerational equity is an important issue).
- Cohesion – considering the integration of retirement system policies, including taxes and transfers (as discussed previously).
The Conexus Institute made a submission to the Retirement Income Review but it didn’t include any recommendations on the SG. Were we gun shy? Not at all – it just came down to resourcing and timing (The Conexus Institute launched as the Retirement Income Review consultation was closing). To properly undertake the analysis would have required a large team to develop a significant model which was stochastic, incorporated household level data (not just individuals), considered the entire range of policy levers and performed overlapping generation analysis (to assess sustainability).
Rather we tried to follow the brief, and contribute to the fact base by detailing aspects of a quality assessment. Basically, we wanted to contribute to the mosaic.
I’d be surprised if the Retirement Income Review made a well-considered and informed recommendation on the SG. It would be highly difficult to perform the required analysis within such a short period of time. Perhaps they are setting themselves up for subsequent reviews. It would be disappointing if they felt pressured to take shortcuts.
Commentators will view submissions that didn’t cover many of the criteria detailed but made strong recommendations on SG in their own way. They may provide particular elements which contribute to the mosaic, they may just be poorly informed, or perhaps they represent agent-motivated lobbying. As for the media debate – that’s a different game altogether.