The Federal Government’s 2015 Budget changes to the Age Pension asset test are still proving problematic, according to the latest research from Willis Towers Watson.
The research, released this week, found that while investment markets performed strongly from 2010 to 2014, there has not been a corresponding improvement in the projected retirement income adequacy for all groups, especially for couples.
It said a key factor leading to these mixed results had been the impact of changes to the Age Pension assets test announced in the 2015 Federal Budget which take effect from 1 January, next year.
The Willis Towers Watson analysis has suggested that just as certainty is vital to the future effectiveness of superannuation, the same goes for the Age Pension.
It said its research had revealed that Australians were mostly making progress with respect to retirement incomes adequacy, but that the pension asset test changes announced last year had taken their toll.
“If we are to have a fully integrated retirement system built around the three main pillars of the age pension, superannuation and other savings, which will allow future retirees to plan effectively for their retirement, then greater certainty about the level and availability of the age pension for future retirees is vital,” the Willis Towers Watson research analysis said.
Looking at the impact of the asset test changes, the research pointed to a significant impact on the proportion of couples expected to achieve a comfortable level of retirement income, with a reduction from 62 per cent to 51 per cent.
“On the other hand, singles are expected to be affected less with a reduction from 38 per cent to 37 per cent in the proportion of singles expected to achieve a comfortable level of retirement income,” it said.
Commenting on the research, Willis Towers Watson senior consultant, John Burnett said Australians might be feeling more positive about their projected retirement income due to the strong results that investment markets had delivered to superannuation savings and other assets over the period from 2010 to 2014.
“However, many may not be aware of the changes to the asset test due to take effect in 2017 and the significant impact this will have, particularly for couples,” he said.
“If Australians are to be encouraged to plan for retirement in advance, they need greater certainty on the level and availability of the age pension that will be payable to them once they retire.”
