The 2015 Intergenerational Report (IGR) highlights the critical importance of ensuring that the superannuation system can provide income streams for people to fund their retirement, says SMSF Association CEO/Managing Director Andrea Slattery.
“This report has a very positive message; Australians are living longer, with increased life expectancy accompanied by better quality health.
“In this environment it is imperative that all governments adopt a bipartisan approach to superannuation that will allow the system to achieve its primary goal – to provide dignity and security for Australians who will be living longer, healthier lives.
“It certainly reinforces the Association’s message that now is the right time to have an informed debate about creating the right settings in our superannuation system to encourage people to forego income today to have financial security in retirement.”
Slattery says the SMSF sector is showing what can be achieved in terms of retirees acting responsibly with 93% in the draw-down phase opting to take their savings via an income stream.
“However, there is much more to be done to encourage lesser dependence on the Age Pension as the IGR projects only a small reduction in reliance on the pension.
“In light of this projection, surely it underlines the Association’s argument that superannuation has to encourage and allow people to build adequate superannuation balances and this requires the right incentives for long-term savings.”
Slattery says the IGR’s call for increased participation by older workers indicates a need to ensure that the superannuation system allows these workers the opportunities to keep saving for their years out of the workforce and provide an incentive for them to keep working and saving through superannuation.
“It is an issue that the Association has been addressing with our recent Budget submission detailing ideas on voluntary contributions for those working past age 75 and greater flexibility for post-tax contributions after age 65.”
Slattery says the enormity of the issues posed by a demographic shift to an older population that will live longer are well documented in this report.
“It predicts that by 2054-55 there will seven million Australians aged 65 to 84, compared with around 3.1 million in 2015, and that 5% of the population will be aged over 85.
“Life expectancy at birth is projected to increase from 91.5 years in 2015 to 95.1 years in 2055 for males, and from 93.6 years in 2015 to 96.6 years for females. Further life expectancy at age 70 is projected to increase from 16.9 years in 2015 to 21.3 years in 2055 for males, and from 19.3 years in 2015 to 23.1 years for females.”
“In the sense that it means people will be living longer, more active lives, it’s extremely positive. But as the IGR details, it will create fiscal challenges for future governments that will have to deal with an aging population that potentially has lower workforce participation and a higher dependency ratio of retirees to tax paying workers.
“This will be accompanied by increased expenditure on supporting the aging population through age pension income support, health care and aged care spending. The importance of getting the right policy settings for superannuation is paramount.”
About the SMSF Association:
The SMSF Association is the authoritative voice for the self-managed superannuation fund sector. The Association, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.
Contact for interviews:
SMSF Association CEO/Managing Director
M: 0417 898 317
M: 0409 585 979