Changes are needed to reduce the cost of the Age Pension, says the Centre for Independent Studies (CIS), including to superannuation.
The CIS says there has been a “marked growth in pension cost and cohort”, releasing the report the myths of the generational bargain.
According to the CIS, this growth has been driven by increasing life expectancy and the higher real value of age pension payments.
“These pension increases far outstrip wage growth, with pension costs as a percentage of wages at the highest level ever and having doubled over the past 45 years.”
“This imbalance is projected to get worse in the future, with pension costs increasing against wages by another 50% despite the maturation of the superannuation system.”
“To restore balance, the government needs to reform several aspects of the retirement income system”, says the CIS, recommending:
- the age pension eligibility age increase by around 6 months every 4 years
- the superannuation preservation age be increased, so it is no more than 5 years lower than the age pension age
- the family home be included in the means test for the pension
- the Government should restrictions on accessing superannuation before age pension age and consider requiring the purchase of a deferred annuity
“While these measures will treat the symptoms of the problem of sustainability of the retirement system, they won’t impact on the incentives already in the system. To do that will require more substantial reform, particular of superannuation to encourage people to be self-sufficient in retirement rather than rely on the taxpayer.”
The CIS therefore recommends a “substantial” review of superannuation, which “should focus on ways to reduce the burden of taxation and boost balances without increasing the superannuation guarantee rate and lowering real wages.”
COTA calls for retirement income review following ‘alarmist headlines’
COTA Australia has called for a review of retirement incomes after “alarmist” headlines in the media based on the CIS report.
“Leading seniors advocate, COTA Australia, today renewed its call for a considered, holistic and independent Retirement Incomes Review in light of yet another round of exaggerated claims about the age pension,” said a COTA statement.
COTA Chief Executive Ian Yates said it was disappointing to again see alarmist media headlines based on the CIS report, though he said the report “actually makes some reasonable recommendations about our retirement incomes system which an independent review should seriously consider”.
He said the age pension rules were “significantly tightened only last year” and Australia has one of the most modest and targeted pension systems in the world.
“Week after week, claims and counter claims in the media by various politicians, think tanks and other commentators equates to an unsettling environment for all retirees.”
“The only way to avoid this is for a sensible, independent review of the whole retirement incomes space for which COTA has been calling for almost two years, supported by business peaks, superannuation groups and other seniors’ advocates, and the National Reform Summit.”
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