The Government’s changes to superannuation and the age pension are working, but what the system needs now is stability, says the Association of Superannuation Funds of Australia (ASFA).
According to ASFA data shows that super and pension changes have had a “substantial and positive impact” by reducing government expenditure and increasing tax revenue.
“The Age Pension assets test changes that took effect from 1 January 2017 are helping contain future growth in Age Pension expenditures,” said ASFA CEO Dr Martin Fahy.
“Superannuation tax changes have substantially reduced the tax assistance flowing to upper income earners, plus the overall amount of tax concession for super contributions has been reduced by around $1.25 billion a year.”
“In addition, there is a further $1.1 billion a year in greater tax revenue in regard to superannuation investment earnings flowing from the cap on balances in pension phase and changes to the Transition to Retirement pension arrangements. These changes have impacted most on upper income earners.”
The number of Age Pension recipients fell 3% between December 2016 and March 2017, from 2,570,072 to 2,494,060. The Age Pension is expected to cost $45.4 billion in 2017/18, “up marginally” from the $44.5 billion in 2016/17.
ASFA says the changes appear to make the Age Pension fiscally sustainable, while not leaving the great bulk of retirees “substantially” worse off.
“This will be reinforced by rising superannuation account balances at retirement as the compulsory system matures,” said Dr Fahy.
“However, any further tightening of either the asset or income test could leave many Australians in retirement worse off,” he said.
“Super is working and will do more of the heavy lifting to deliver retirement outcomes into the future,” he said.
ASFA expects that around 30% of Australian aged over 65 will be on the full Age Pension by 2025, which could decrease to 25% or less by 2055.
Tax changes have also reduced the proportion of superannuation tax concessions going to high income earners, ASFA finds. The proportion of total concessions for contributions going to those paying the top income tax rate fell from 13.3% to 10.8%.
ASFA estimates that the Transfer Balance Cap, lower non-concessional contributions and TRIS changes save the budget $1.1 billion a year.
“ASFA believes tax and Age Pension settings are working and now is the time for consolidation,” said Dr Fahy.
The ASFA 2018/19 pre-Budget submission recommends: “No further adverse changes be made to superannuation tax provisions or to the Age Pension in the 2018-19 Budget and over the Forward Estimates period.”