More people need to be self-reliant in their later years if the tax pressure on working age people is to be relieved, Revenue and Financial Services Minister Kelly O’Dwyer told a forum yesterday.
Speaking at the AFR Banking and Wealth Summit, the Minister said “if we want people to live the lives that they aspire to in retirement, and to have choices, then they need to build savings today”.
Ms O’Dwyer was making the point after citing that in around two decades, there will be just 2.7 people working for every Australian aged 65 and over. This estimate compares with around seven working people in the 1970s.
However, she also said that today, many low-income earners were being forced to save for a higher standard of living in retirement than they could afford while they were working.
The Minister went on to criticise how industry funds calling for an increase to workers’ contributions to super were spending members’ money on lobbying.
“The superannuation industry is often very quick to point out that the only way people can achieve higher incomes in retirement is by compelling an ever increasing amount of wages to be sacrificed into superannuation. But they would say that wouldn’t they?” Ms O’Dwyer continued.
“The increase of (the super guarantee from) 9.5 per cent to 12 per cent will mean around $10 billion a year more flowing into the industry in 2025-26. Which, of course, means a bonus of hundreds of millions of dollars in fees each year for the industry and ever-increasing salaries for industry professionals.
“And that is before you take into account all that additional money sloshing around for other cultural practices that have built up along the way. For example:
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members of superannuation funds have to stand by and watch as their retirement savings are spent on straight out political advertising
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or dubious sponsorships of union congresses
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or on superannuation liaison officers who are in fact union officials being paid out of super funds
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or on a lobbying outfit whose principal achievement last year was to stand in the way of the regulator, APRA, getting important new powers to protect members’ money.
“The fact is, mandating what people must put into their superannuation isn’t the only way to increase retirement savings. A far better way is to ensure that those people who want to save more than the mandated amount have sufficient flexibility within the system to do that.’’
She told the summit that the Government was developing a framework for comprehensive income products in retirement.
“This will allow someone to invest in a product that can deliver them a fixed income that is triggered at say 80 years of age, at a time that they may be less active in the management of their retirement income. Such products can also provide financial security against longevity risk, that is, that you will outlive your savings.”
Ms O’Dwyer also said certainty around the tax treatment of super was important and that the Government did not plan to introduce more changes.
“The Government has made it clear that our package of tax changes announced in the 2016/17 Budget … are the only tax changes that we intend to make.”
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