Retirement Income Review

COTA Australia welcomes the opportunity to provide input into the Retirement Income Review. The Review will consider both the three pillars of our retirement incomes system (the age pension, compulsory superannuation and private savings), and their interactions; and will consider the extent to which the system as a whole:

  • enables all Australians to achieve adequate retirement incomes;
  • is fiscally sustainable; and
  • provides appropriate incentives for self-provision in retirement

COTA Australia has long called for a Review of this kind which will for the first time consider not only the individual components of Retirement Income policy but will also look holistically at all three retirement income pillars and how the three pillars interact and do or do not complement each other.

We envisage a system that is simple, adequate, fair and fiscally sustainable. Our view is that there are a number of ways to improve the current system to achieve this vision. This submission explores the key issues.

Our Retirement Income System should unequivocally prevent poverty among older Australians.

No one should have to live in poverty in a country with the wealth of Australia. At any age, we should all have the dignity and security of a roof over our head, food on the table, timely access to support and care when needed, and the capacity to be socially connected. Changes to the labour force, the housing market, the rate of wage growth and market behaviour and performance can create higher risks of poverty and inequality. Australians value a strong safety net, paired with social services designed to address underlying inequalities – from a strong health system, to adequate income support for when people need help to get by. These should be among the highest of priorities of what our taxes are supposed to pay for, and what government budgets should prioritise.

Retirement Income policy is about income in retirement, not a savings plan for other purposes
COTA is concerned by any and varied suggestions that superannuation should not be for the exclusive purpose of generating retirement incomes. The suggestion that superannuation can be accessed throughout an individual’s lifetime for other purposes diminishes the importance of the need to provide a better quality of life in retirement than the age pension alone will provide on current settings. While saving for a home deposit, or provisioning for other major life events, are important issues worthy of the full force of Government’s policy levers, accessing and diminishing compulsory superannuation accumulations is not the answer.

We note that mechanisms such as the First Home Super Saver (FHSS) scheme which require voluntary savings but provide access to tax concession advantaged benefits on the same basis as superannuation, but without reduction in the Superannuation Guarantee, are a legitimate subsidy that do not compromise retirement incomes, whether or not they prove to work.

Consumers are asking for a simple, sensible, fair and stable retirement income system.

Our experience is that the complexity of the system leaves room for improvement. The system is overly-complex with complicated, poorly targeted concessions, some of which lead to perverse outcomes. Consumers largely have no active interest and engagement in their retirement income components until they come closer to needing them. There is a need for the retirement income system to be structured and communicated so that people are better able to understand and navigate the system to plan and access optimum and appropriate benefits. Among those people who do consciously plan and provide for their retirement there is a constant fear that the “rules will change” in ways that will negatively impact on them. It is hoped that this Review can result in changes that will create greater confidence and clarity for older people who have carefully planned their retirement incomes.

Every dollar of wages earned deserves the same amount of superannuation paid, no matter the relationship and status under which you are employed, or your age.

Whether you’re a casual worker under the age of 18, or an employee over the age of 75, you deserve the same rights to entitlements as your colleagues between the ages of 18 and 75. Yet those above 75 or below 18 do not have the same rights to compulsory superannuation, and in the case of those over 75, to voluntary super. We submit that’s an issue of fairness that should be considered by the Review.

Similarly, people who work for several employers and earn less than $450 per month from any one employer, but overall earn more than $450 per month, do not have a right to compulsory superannuation. COTA believes everyone should have the same entitlements to superannuation and every dollar earned should attract and receive 9.5 cents in superannuation, without any lower limit.

Perhaps more complex is the issue of ‘contractors’ and the self-employed. The increased ‘gig-economy’ type contractor, is not the same as the small business shop owner who might retire with a nest egg by selling their bricks and mortar shop. Why should a person engaged as a contractor not be entitled to the same retirement income contribution as a person engaged as an employee? COTA would submit the Review must investigate why this situation should be allowed to continue. Similarly, we believe serious consideration should be given to requiring self-employed people to make superannuation contributions as if they were employees. We should regard super contributions as an integral part of the cost of doing business.

COTA submits that in a modern Australia, every dollar earned from work should include an equitable amount of superannuation.

Government spending should be fair and equitable, not just for the financially advantaged
The Review’s consultation paper clearly indicates that there will be higher levels of foregone revenue through tax concessions for superannuation contributions and earnings than will be spent on the age pension, if the current tax concession provisions continue. COTA believes it is critical the Review consider a range of alternative policy settings to the current tax concession arrangements. Such an approach should include modelling changes to current superannuation tax concession arrangements so that everyone receives an equitable discount off their marginal tax rate (including topping up the super of low-income earners who don’t currently pay tax).