Australia’s peak body of superannuation funds has hit back at a report by the Grattan Institute that the aged pension and rent assistance are better tools than superannuation to support low-income earners in retirement.
In a submission to the national review of superannuation, the Grattan Institute called on the Senate Standing Committee on Economics to “reject the view that superannuation’s objective is to provide an adequate, or ‘comfortable’ retirement income for all Australians”.
“This view misleads, because the age pension and rent assistance are better tools than super to provide an adequate retirement for those on low incomes,” the submission said.
“And this view would support maintaining generous tax breaks, at substantial budgetary cost, for those whose retirement will be comfortable without them.”
In its submission, the Grattan Institute said the Association of Superannuation Funds of Australia’s “comfortable” retirement standard of annual expenditure $43,372 for a single and $59,619 for a couple was unattainable for low-income Australians.
“This standard supports an affluent lifestyle more luxurious than most households experience during their working lives,” it said.
“The average household can only reach the ‘comfortable’ benchmark in retirement by being less than ‘comfortable’ beforehand.”
But ASFA CEO Dr Martin Fahy says the institute’s stand is “patronising” and “poor public policy”.
He says the claim that ASFA’s retirement benchmark would deliver a luxurious lifestyle suggests the think tank is out of touch with the cost of living.
The benchmarks are based on projected living expenses in retirement, including health and aged care with the associated out-of-pocket medical expenses, running a modest car, basic home maintenance, and being able to run air conditioning in summer and heating in winter
The number of Australians reaching a comfortable standard of living in retirement will increase from about 20% to 40% by 2040, Fahy says.
Dr Fahy says ASFA believes Australians are justifiably worried about longevity and aged and health care costs in retirement and superannuation is a big part of the solution.
“Super makes a substantive difference to retirement incomes, including for low income earners.”