Super and pension budget measures in firing line of retirement review

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FOUR more long years of this … One of the Panelists for the Review is  Professor Ralston who was also a spokeswoman for the Alliance for a Fairer Retirement System – a group set up to oppose Labor’s franking credit policies in the lead-up to the federal election.

Shadow treasurer Jim Chalmers and opposition social services spokeswoman Linda Burney said:

“After six years of attacks on retirees and older Australians, [Prime Minister] Scott Morrison and Josh Frydenberg must rule out the possibility that this review will become a stalking horse for cutting the pension, including the family home in the pension asset test, and further delaying the legislated increase in the superannuation guarantee to 12 per cent,”

Super and pension budget measures in firing line of retirement review

By Shane Wright and Eryk Bagshaw

Updated September 27, 2019

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Talking points

  • The review will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages, Treasurer Josh Frydenberg says.
  • A three-person panel headed by former senior Treasury official Michael Callaghan will run the review.
  • A consultation paper will be released in November, with the final report due by June.

The next increase in compulsory superannuation and a string of budget savings measures that have crimped retirees’ incomes will be investigated in the first comprehensive review of the nation’s retirement income system in 30 years.

Treasurer Josh Frydenberg on Friday released the terms of reference for the inquiry, which will cover the age pension, voluntary savings including the family home, aged-care funding, franking credits and the role of the powerful $2.9 trillion superannuation industry.

Treasurer Josh Frydenberg said the wide-ranging review would examine "the current state of the system and how it will perform in the future as Australians live longer and the population ages".
Treasurer Josh Frydenberg said the wide-ranging review would examine “the current state of the system and how it will perform in the future as Australians live longer and the population ages”.CREDIT:ALEX ELLINGHAUSEN

The wide-ranging review would examine “the current state of the system and how it will perform in the future as Australians live longer and the population ages“, Mr Frydenberg said.

Noting that retirement incomes were based on three pillars a means-tested aged pension, compulsory super and voluntary savings – the terms of reference require the review to establish a “fact base” of the current system

It will then identify how the retirement system helps supports people in retirement, the role each pillar plays in that support, distributional impacts across the population and over time as well as the impact of current policy settings on public finances.

A three-person panel headed by former senior Treasury official Michael Callaghan will run the review. He will be joined by Carolyn Kay, a member of the Future Fund’s board of guardians, and Deborah Ralston, chair of the Self Managed Super Fund Association and a member of the Reserve Bank’s payments system board.

* Professor Ralston was also a spokeswoman for the Alliance for a Fairer Retirement System a group set up to oppose Labor’s franking credit policies in the lead-up to the federal election.

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The Productivity Commission in December urged the government to undertake the review before “any increase in the superannuation guarantee rate”. The guarantee, which is the amount of compulsory super that must be paid to employees, is scheduled to rise from 9.5 per cent to 10 per cent by 2021, before reaching 12 per cent by 2025.

Several Coalition MPs have been pushing back against the legislated timetable, arguing workers need pay rises now, not savings for their retirement.

They have also raised concerns about the efficiency of the overall system, which has seen some workers in underperforming funds up to $188,000 worse off.

*Shadow treasurer Jim Chalmers and opposition social services spokeswoman Linda Burney said Labor would engage with the review but warned it should not be used to hit the next superannuation guarantee increase.

*“After six years of attacks on retirees and older Australians, [Prime Minister] Scott Morrison and Josh Frydenberg must rule out the possibility that this review will become a stalking horse for cutting the pension, including the family home in the pension asset test, and further delaying the legislated increase in the superannuation guarantee to 12 per cent,” they said.

Industry Super chief executive Bernie Dean said the sector responsible for Australia’s retirement savings had to ensure the system was working as efficiently as possible.

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“Compulsory superannuation is the cornerstone of our retirement income system and we all have an obligation to work together to ensure it is operating as well as it can be,” he said.

Council on the Ageing chief executive Ian Yates said the review “would have a lot of ground to cover” and the pressure on the government to act on its recommendations would become “quite substantial”.

Mr Yates said he expected the review to investigate the level of compulsory super, the asset level at which pensions were reduced, housing and aged care.

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“It’s quite a powerful terms of reference,” he said. “I think clearly taxpayers’ money is not being used as well as it could be to achieve best outcomes. There are different bits that don’t fit together at the moment.”

National Seniors’ chief advocate Ian Henschke said past changes to the age pension taper rate meant people with $800,000 in savings were now up to $12,000 a year worse off than people who had savings of $400,000.

The review offered a real chance to look at changes made in recent years that had hurt the bottom line of many retirees as well as the plight of pensioners, particularly women, who were now living in poverty, he said.

“We’ve seen some perverse outcomes from the changes made over the years and now we have a chance to see what damage they’ve caused,” he said.

Brendan Coates, household finances program director with the Grattan Institute, said the breadth of the terms of reference was promising and Mr Callaghan was a strong choice to lead the review.

It’s quite a powerful terms of reference.

The only problem might be the tight deadline facing the review panel, he said. A consultation paper will be released in November, with the final report due by June.

“With such a broad scope the review panel will have its work cut out to deliver the final report by the Treasurer’s deadline,” Mr Coates said.

Shane Wright

Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

Eryk Bagshaw

Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra

SOURCE: https://www.smh.com.au/politics/federal/super-and-pension-budget-measures-in-firing-line-of-retirement-review-20190927-p52vkf.html#comments

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