Climate change, the gig economy, wealth locked up in real estate, early retirement and living longer are the biggest challenges to our future savings, Australia’s leading actuary body warns.
In a pre-Budget submission to Treasury, the Actuaries Institute is urging the government to simplify Australia’s superannuation regulations, review areas where retirees need extra support and legislate to make the retirement income system clearer.
The institute also raises concerns about rising economic inequality among the generations due to the COVID pandemic, saying asset gains through home ownership are helping to boost the net wealth of older Australians but doing little to help younger workers.
It recommends simplifying regulatory requirements, such as merging the Age Pension asset and income tests, potentially including a portion of home ownership in the test, and a review of Rent Assistance for retirees who are not homeowners.
The institute also wanted more focus on other forms of assistance that support older Australians, especially for those forced into early retirement or managing on smaller incomes.
A Superannuation Guarantee should fall between 9.5 and 12 per cent to ensure most Australians “lived in dignity in retirement” but community support should be sought to decide on the figure.
“Along with retirement policy, the pre-Budget submission addresses climate change and the need for measures to help Australians develop greater resilience to extreme weather; intergenerational inequity, which is wider now than it has been at any time in the previous two decades, and the rise of gig workers as a significant part of Australia’s economy,” says Jefferson Gibbs, president of the Actuaries Institute.
The institute publishes the Australian Actuaries Climate Index each quarter, which is a measure of extreme weather and sea levels. It shows temperatures are warming, sea levels are rising and extreme dry conditions are more frequent. Funding mitigation works and strengthening building codes, where cost effective, could lessen the devastation caused among communities, businesses and the economy.
The submission also seeks improved data collection on gig workers. A larger gig workforce, which the institute estimates grew nine-fold between 2015 and 2019, capturing $6.3 billion in food delivery and rideshare spending alone, had implications for policy, including shrinking superannuation savings, and likely future increased Age Pension costs.
“Increases in unemployment are greatest for younger Australians, and there is past evidence of long-term labour market scarring for those who enter the labour market during a recession,” Mr Gibbs said. “This, combined with increased government debt, means that while the direct health impacts of COVID-19 fall more heavily on older Australians, the young shoulder much of the economic burden.”
What key issues do you want to see addressed in the Federal Budget? Do you hold any hope that the government will combine the assets and income test for the Age Pension?
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