Australians May Have to Wait Longer For Pension Payment Rise
Australians may have to wait even longer for a rise in pension payments from their employers, after a review of the retirement income system backed arguments for a freeze.
Under the nation’s pensions system, employers pay 9.5% of a worker’s gross salary into a retirement fund. That is legislated to gradually rise to 12%, starting from next year. But some lawmakers are opposed to the increase, saying it will further impact already anemic wages growth and be an additional burden on struggling businesses. The government says it doesn’t need to rush into making a decision, but has indicated it’s considering a freeze.
The review released Friday backs such arguments, saying a rise may result in an “unacceptable reduction in living standards prior to retirement,” particularly for low-income earners. If the mandatory contributions were frozen, a worker’s income would be about 2% higher over the longer-term, the report said.
It’s one of many findings in the government-commissioned review that could be the basis for a fresh round of reforms. An earlier inquiry found the industry managing Australia’s A$2.9 trillion ($2.1 trillion) pot of retirement savings was beset by a litany of problems including high fees and chronic under-performance by some funds.
“Like any complex system, it is not beyond improvement,” Treasurer Josh Frydenberg said Friday. “The report’s many observations and detailed analysis will be used by the government in consideration of future policy decisions.”
The review found Australia’s retirement savings system is complex and misunderstood, which has led to some people not adequately planning for retirement or making the most of their assets. Here are some of the other findings:
- A clear objective for the system is needed to guide policy, improve public understanding of superannuation and provide a framework to assess its performance. Living standards should be balanced across a person’s working life and retirement
- The family home represents the largest share of net wealth for retirees and provides a form of security in retirement through low housing costs. The equity can also be drawn on for retirement income, though few choose to do so
- The retirement income system is broadly sustainable. While costs of tax concessions will rise over the next 40 years, that’ll be offset by less spending on the state-based pension
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