by “Like any complex system it is not beyond improvement and the report’s many observations and detailed analysis will be used by the government in consideration of future policy decisions,” he said.
The report, which makes no recommendations, backs Paul Keating’s rationale for introducing compulsory super, saying without it, middle-income earners would not save enough for retirement.
It suggests there are alternatives to increasing the rate above 9.5 per cent, such as accessing equity in the home using reverse mortgages, or better financial literacy so people could “optimise their retirement income through the efficient use of their savings”.
“More efficient use of savings in retirement can have a bigger impact on improving retirement income than increasing the SG,” it says.
Most people die with a large amount of super left over and Superannuation Minister Jane Hume noted suggestions such as increasing the drawdown rate, as well as measures already in train to force super funds to provide more comprehensive products in the retirement phase “to address the longevity risk”.
The report highlighted the very low take up of annuity products as a weak point in the system, saying they should be better utilised, or indeed mandated, to help smooth retirees’ incomes and consumption.
“Low take-up of annuities is not unique to Australia. Economists call the fact that people invest very little in annuities, even though they facilitate consumption smoothing, the annuity puzzle.
Labor and industry super said the report was a stalking horse for slowing down contributions to Australia’s $3 trillion retirement savings system.
“Dont believe the Liberals when they say freezing the super guarantee is all about boosting wages,” shadow treasurer Jim Chalmers said.
“In the six years before the last time they froze it, wages grew at 3.3 per cent on average. In the six years since then, wages have grown at record lows and an average of 2.08 per cent.”
Labor leader Anthony Albanese said backflipping on the guarantee would be a broken election promise.
“Make no mistake, Labor supports the existing 12 per cent superannuation that has been legislated and we’ll fight any attempt to undermine it or change it,” he said.
“Because that will be bad for workers in their retirement, and it’s also not in the national interest.”
Further to the claimed hit to wages, the report also noted that further contributions to super might be futile, given lower returns on super investments in an uncertain economic environment.
“Growth in the value of these assets is uncertain in the short- to medium-term because of the lower economic and population growth and higher unemployment caused by the COVID-19 pandemic,” the report said.
The report also emphasised how incomes could be more effectively used to position workers in a rising housing market.
“Increases in home values mean prospective home owners need to spend more of their working-life incomes to finance their purchase. As a result, people have less income available to either spend during working life or invest in other savings vehicles.”
