Home' acuity : Acuity August 15 Contents By shifting from the Age Pension and defined
benefit-type super toward defined contribution
superannuation we have by design a system that
will tend to widen inequality in retirement.
AUGUST 2015 | acuity
comfortably in retirement, the ASFA
retirement standard states that a couple
who retires at age 65 needs a super
balance of A$510,000.
“If you have not accumulated that
amount in super and are able to work,
then you may wish to continue to
do so to ensure a more comfortable
Diane Maxwell, retirement
commissioner at New Zealand’s
Commission for Financial Capability,
says in December 2013 the Commission
put forward some recommendations to
“One of which was to raise the age of
eligibility in line with longevity, simply
meaning as we live longer so the age
goes up. With the next generation likely
to live into their 90s, if they continue to
be eligible for super at 65 they will be
receiving it for 25 to 30 years.
“ The other consideration is that 65
today is not what it was 20 years ago
and it will be different again in 20
“We are saying the age should not
go up today, or tomorrow, or in five
years’ time, but it should go up to 67
in 20 years time. That will give people
time to prepare for change, but
ensure that change is gradual,” says
Rafal Chomik, senior research
fellow at the UNSW’s ARC Centre
of Excellence in Population Ageing
Research, says given the fiscal
challenges of an ageing population,
most governments in advanced
economies are looking to increase
labour force participation at older ages.
“ This has the double whammy effect
of increasing tax revenue and delaying
access to benefits,” he says.
“Working longer has its advantages,
too. An extra year of work can mean a
higher income in retirement – savings
accumulate and compound longer
and the income is spread over a
“People do not often appreciate how
long they will be retired. Someone aged
50 today is expected to have another 30
years ahead of them when they turn 65
in 2030, on average,” says Chomik.
Much debate takes place over the
involvement of the government in
Governments must strike a balance
between encouraging savings for
retirees to support themselves, and
ensuring that retirees are not left in
desperate situations in their final years.
Dick Bryan, professor of political
economy at the University of Sydney,
says the starting point for debate
over the level of government support
for retirees is a human rights and
“People have entitlement to a decent
living in old age. The problem the
government has is that it wants us to
take more responsibility for life course
risks and become more and more
entrepreneurs of our own lives, and
those of our dependents.”
Bryan says that two major issues
emerge from this government aim.
“First, life course risks tend to be
unpredictable and hard to manage
individually. Financial misfortune or
mismanagement can see any self-
entrepreneur become financially
unviable in old age,” he says.
“So the government’s current strategy
is to compel us to save, and to provide
just a minimal safety net for the
misfortunate or the mismanaged. In
personal entrepreneurship, there are no
provisions of limited liability.
“Second, it is unclear how much of a
self-entrepreneur’s accumulated assets
must be expended before they become
eligible for some government funding.
Here there is no simple answer.
“A system that encourages being an
entrepreneur, yet provides no access to
limited liability on investments, has an
incoherent set of incentives,” says Bryan.
Bonarius says the government needs
to continue providing a universal Age
Pension to those who do not have
adequate savings to ensure that elderly
Australians do not face poverty in
“ The government should also
continue to provide tax incentives on
contributions and earnings in super to
incentivise and reward savings.
“There are some problems with the
current levels of support provided. Firstly,
the Age Pension is too generous. Couples
may receive a part pension when they
own their own home and have over A$1m
(continued on page 32)
Links Archive Acuity July 15 Acuity Sept 15 Navigation Previous Page Next Page