In its submission to the Retirement Income Review, the Alliance for a Fairer Retirement System said there should be a fifth pillar added to the existing principles included in the current mandate.
The four current pillars are adequacy, equity sustainability and cohesion, but the AFRS believes "certainty" should also be a consideration.
AFRS spokesperson Ian Henschke explained: "The cohort outside the current system includes the self-employed, those in the gig economy and older, retired Australians — none of these has the benefit of compulsory superannuation. Small business owners frequently rely on selling a business to fund retirement, yet not all business owners can sell their business."
Henschke continued: "Those in the gig economy frequently suffer from fragmented employment, making savings a challenge. Non-compulsory saving can also prove difficult for many. It’s vital, therefore, that policy settings take account of the impact on all retirees and not only those who have benefited from superannuation.”
Furthermore, Henschke said there was currently insufficient integration between the Age Pension and superannuation, adding that "leakage from superannuation will increase the costs of the Age Pension. The longer money stays in superannuation, the more Age Pension costs can be reduced."
"Age Pension rules are overly complicated," Henschke said. "If simplified there’d be less opportunity to undermine savings behaviour leading to perverse outcomes.”
Reflecting the desire for greater clarity around the interactions between superannuation and the Age Pension, new Investment Trends research has found that a small increase in superannuation contributions (1.5% per annum) contributes significantly to pre-retirees’ peace of mind.
The Investment Trends Retirement Income Report, based on a survey of 5,210 Australian adults, found that fewer than half (47%) of working Australians above 40 believe they’re prepared for retirement.
Commenting on the research, Investment Trends senior analyst King Loong Choi explained: “While many Australians worry about their retirement prospects, there is only a small difference in superannuation contribution levels between those who fear being unable to retire comfortably and those who are positive about their prospects.”
Choi added: “Australians who believe they will live comfortably in retirement typically contribute 11% of their annual household income into their super fund, meaning that an additional contribution of 1.5% p.a. above the Super Guarantee level (of 9.5%) contributes significantly to their peace of mind.
“Even among lower income households, a slight increase in super contribution levels corresponds with greater confidence in retirement outcomes.”
How do you think these concerns can be factored into the Retirement Income Review?
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