On 27 September Treasurer Josh Friedenberg announced yet another review which was in response to a recommendation of the Productivity Commission review in 2018 ‘Assessing Efficiency and Competitiveness [of superannuation]’.
It seems that every few years there is a review into Australia’s superannuation system. For example, Jeremy Cooper’s review of 2009 and the Financial System Inquiry led by David Murray of 2014 (which devoted significant focus on superannuation/retirement).
So what is this latest review about, how will it be different to the ones before it, and what could it mean for the retirements of everyday Australians?
A fundamental difference of this review is that the scope of the review is of the whole retirement income system, not just superannuation.
The Terms of Reference highlight that:
Australia’s retirement income system is based on three pillars:
It is important that the system allows Australians to achieve adequate retirement incomes, is fiscally sustainable and provides appropriate incentives for self-provision in retirement.
Specifically, the Retirement Income Review (RIR) is responsible for identifying:
The first thing that Australian seniors should pay attention to is that home ownership is included within the scope of this RIR. Whilst this is likely to cause concern for many Australian seniors it should be noted that the Treasurer, on announcing the RIR, reaffirmed that the Government would "never" include the family home in the asset test for the Age Pension. Whilst this provides some comfort, the question remains what recommendations will the RIR make in relation to the role of private savings, in particular home ownership, in providing sources of retirement income for both current and future Governments to consider.
It will be interesting to see what the Review considers with respect to reverse mortgage and equity release schemes, given the withdrawal from these markets by all major banks. The Government’s recent amendments to open up the Pension Loans Scheme to far more eligible seniors are commendable but more innovation is needed.
The RIR is particularly relevant when you consider the increasing impact the Age Pension is projected to have on the Government’s budget position. There is currently a lot of market debate around the cost of the superannuation concessions to the public purse compared to the reduction in Age Pension dependence in the future.
As in all such reviews expect the usual vested interest groups who make vast sums of money off the retirement system to make self-serving statements and submissions.
The RIR, headed up by Mike Callaghan, is due to publish a public consultation paper in November and conclude its review by June 2020 which is not a lot of time given the scope covers such a broad and complex system.
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