Treasurer Jim Chalmers is expected to kick off a public consultation about retirement income settings, as the landmark intergenerational report shows superannuation will take significant pressure off the age pension over the next four decades.
Commonwealth Treasury will reportedly release a discussion paper within weeks laying out some of the systemic problems the superannuation sector faces in meeting its legal duty to assist members transition to retirement.
The treasurer on Wednesday told an annual event held by cardboard billionaire Anthony Pratt and the Australian Financial Review that too many Australians are living “more frugally than they need to”, reflecting the conclusions of the 2021 Retirement Income Review.
The imminent consultation follows a damning report by regulators ASIC and APRA, which found many funds had made “insufficient progress” in meeting their obligations under the retirement income covenant. It also follows high-level talks at the 2023 Retirement Conference in Canberra, a joint initiative of Conexus Financial (publisher of Investment Magazine) and the Conexus Institute.
“Transforming a large defined contribution system mostly focused on accumulation into an effective drawdown system which supports retirees is a significant challenge, which no DC pension system in the world has achieved,” said Conexus Institute executive director David Bell. “Change tends to occur incrementally in the retirement income space, and hopefully a review like this can help to move things along.”
Bell said the institute, an independent think-tank philanthropically funded by Conexus Financial, looked forward to taking part in any public consultation.
The Financial Services Council also welcomed the treasurer’s comments.
“800 Australians are retiring every day, and the government is right to prioritise action to make sure these consumers can choose from a range of products consistent with superannuation’s promise of delivering income for a dignified retirement,” said FSC chief executive Blake Briggs.
“The Retirement Income Covenant requires superannuation funds to formulate strategies to optimise retirement outcomes for members, however the FSC believes this framework will be more successful if the government removes regulatory barriers that are inconsistent with the covenant.”
He highlighted the lobby group’s own retirement roadmap, which proposed reforms that would make the retirement system more “efficient”, including transitioning consumers out of legacy products, re-assessing prudential capital requirements and disclosures.
Briggs said the intergenerational report, released on Thursday, identified the “important role of superannuation in addressing Australia’s financial pressures over the long-term”.
The report showed compulsory superannuation would help reduce in the cost of the age pension from 2.3 per cent to 2 per cent of GDP over the next four decades. It also showed super tax concessions would outstrip the spend on the age pension in the 2040s.