Review queries retirement system understanding
The Retirement Income Review questioned if consumers understand the end purpose of the retirement system and if more needs to be done to make it clearer.
The Retirement Income Review (RIR) has questioned whether the purpose and objective of the retirement income system is well understood by the Australian populace and is seeking evidence as to the level of understanding across the wider community.
In doing so, the RIR had put forward the purpose of retirement income system is to generate funds for consumption in retirement, stating in a consultation paper released last week, the system “aims to allow older Australians to achieve adequate income in retirement, in a way that is sustainable for current and future generations”.
“Although individuals often focus on accumulating assets for a retirement ‘nest egg’, generating income to support consumption in retirement is the primary purpose of the system.”
The RIR paper also added the retirement income system was not designed for the creation of lump sums for spending, or to generate wealth to transfer to younger generations of the same family.
“The retirement income system is not intended to boost private savings per se, nor is it intended to be a source of savings for the purchase of large assets during an individual’s life (such as housing), or to assist with wealth accumulation in order to provide for inheritances.”
To prevent these things occurring, the paper noted policy settings had been put in place, including restricted access to superannuation before preservation age, minimum drawdown rules for superannuation, and the means testing of the age pension but questioned whether the overall objective was well understood.
As part of the consultation questions included in the paper, the RIR asked “Is the objective of the Australian retirement income system well understood within the community?” and also sought evidence to support any responses to the question.
In addition the paper encouraged input on what areas of the retirement income system would benefits from an improved understanding of its operation.
In releasing the paper, the RIR reiterated its exploratory nature stating decisions around retirement income involved ‘trade-offs’ and “it is ultimately up to the Australian community to make judgements about the merits of the various trade-offs.”
“The contribution this Review seeks to make is to identify relevant issues, provide a better understanding of the nature and consequences of trade‑offs, and develop a fact base to help the community make any decisions.”
As part of that work the RIR would also make use of existing research papers and reports, including identifying the basis for the different conclusions made by those publications and will also examine the Productivity Commission report on superannuation released in January 2019.
November 25, 2019