The Australian Government has released the independent Retirement Income Review Final Report which finds that “the Australian retirement income system is effective, sound and its costs are broadly sustainable.”

The Review also finds that Australia’s retirement income system is well placed to respond to the economic challenges posed by the COVID-19 pandemic.

The Review was recommended by the Productivity Commission in its report Superannuation: Assessing Efficiency and Competitiveness and comes 27 years after the establishment of compulsory superannuation.

Three over-arching observations

The Review makes three over-arching observations about the system. Firstly, that the three pillars of the existing retirement income system, being the Age Pension, compulsory superannuation and voluntary savings, continue to provide effective support to Australian retirees and are sustainable in the long term.

Secondly that there is a need to improve understanding of the system so that all Australians can make the most of their assets in retirement.

Thirdly, that the system would benefit from a clear objective in order to guide future policy and provide a framework for assessing its performance.

Other key observations

The Final Report also makes a number of key observations with respect to each of the system’s three pillars, including:

  • The Age Pension, compulsory superannuation and voluntary savings results in most Australians achieving adequate retirement outcomes.
  • The Age Pension provides a strong safety net to those who retire with small superannuation balances.
  • The Age Pension reduces income inequality among retirees, as low income retirees receive the largest Age Pension payments.
  • Superannuation assists middle income earners to smooth their income over their lives. Without compulsory superannuation, middle income earners would not save enough for retirement.
  • More efficient use of savings in retirement can have a bigger impact on improving retirement income than increasing the Superannuation Guarantee (SG).
  • The weight of evidence suggests an increase in the SG rate will result in lower wages growth, impacting standards of living.
  • There are a number of ways that individuals can significantly boost their retirement incomes without having to increase their superannuation contributions, including more effectively drawing on superannuation assets, achieving better-after-fee returns and accessing equity in their home.
  • Voluntary contributions provide flexibility for those outside the compulsory system to contribute to superannuation, such as the self-employed and those who have had interrupted working careers.
  • The Government’s early release policy, enabling Australians to access up to $20,000 of their superannuation across two years, has cushioned the economic impact of COVID-19.

The Retirement Income Review panel comprises of Mr Michael Callaghan AM PSM (chair), Ms Carolyn Kay and Dr Deborah Ralston.

The Review can be found on the Treasury website.


On the blog

Workers Bear 71% to 100% of the Cost of Increases in Compulsory Super, by Robert Breunig.

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