Baby boomers had their say in the May federal election, sensationally playing a key role in returning the Coalition rather than electing a Labor Party intent on dismantling franking credits. Now it appears the Government will tread carefully with its retirement income review so as not to upset the same cohort.
The terms of reference for the review, which have been promised by the end of the year, are being determined with a view to keeping baby boomer voters onside, according to media reports.
Treasurer Josh Frydenberg is drafting the guidelines, with Prime Minister Scott Morrison taking a keen interest.
The review would be expected to cover the key pillars of retirement: superannuation, private savings, the Age Pension and home ownership. YourLifeChoices’ next Retirement Affordability Index, set to be released on 6 October, will present expert views on the aspects that must be considered – or reconsidered. Ours will be a no-holds-barred exercise that explores all issues, sensitive or not.
The Australian Financial Review is reporting that the Government may rule out touching certain ‘sacred cows’.
It says that according to government insiders, the Age Pension and the superannuation system are unlikely to be hit and that other “no go” zones have been identified.
“It leaves open a less contentious review to iron out kinks, such as the interaction of superannuation and the government pension, which can create perverse spending and investment incentives for middle-income retirees stuck between the two systems,” the AFR reports.
“The impact of superannuation on the government’s balance sheet and national savings will also be examined.”
Professor John Piggott, a member of the Rudd Government’s Henry tax review and pension review panels in 2009, told the AFR: “It’s very important the retirement income system is viewed as a whole to recognise how the system fits together.
“Overall, we have a good retirement income system, but it needs systematic attention.”
He said that “risk sharing” retirement income products needed to be developed to allow for the fact people are living longer.
“Most people revert to an account-based pension which doesn’t share any of the risk,” said Prof. Piggott, director of the Australian Institute for Population Ageing Research.
A Green Paper prepared by the Actuaries Institute’s Public Policy team and written by Anthony Asher, David Knox and Michael Rice, stresses the need for integration between the key elements of retirement.
It says: “A world-leading system would take an integrated view across the major sources of income and expenses for retirees, including the Age Pension, superannuation and non-superannuation savings (including the family home), aged care and health costs (including pharmaceuticals). The current system, though world-leading in some aspects, falls well short of that.”
It argues that the system is “complex, intrusive, contains anomalies, produces perverse incentives and is sometimes unfair.”
[b1] Do you fear or welcome the retirement income review? Should the Government be brave and thoroughly review all areas?
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[b1]Unless there is something missing from the end here, I don’t think we need this final sentence.
