Although the level of the full age pension in Australia is reasonable compared to those in other developed economies, the retirement system’s outcomes for the average income worker should be improved, according to Mercer’s David Knox.
Presenting at the Actuaries Institute Financial Services Forum this week, Knox said that bettering such outcomes would both improve the adequacy and fairness of the system.
He said the core question in doing so was “how this can be done in a simple and sustainable manner”, advocating the Danish approach as a solution.
In Denmark, part of the public age pension is paid to everyone as taxable income, with the balance then being paid on an income-tested basis.
Knox said that this could be done by dividing the current age pension into two components:
Benefits of such a system would include:
While Knox acknowledged that there would be an increased cost for the Government, as there would be more part pensioners, he said that it would be counterbalanced.
“This expense would be offset, at least to some extent, by additional income tax from those with higher taxable incomes and possibly, a reduced demand on Government services due to the extra income and the changed behaviour as additional saving would be clearly rewarded,” he said.
New research has shown Australians are retiring at their oldest age in over 50 years.
The $300 billion fund has announced the development of a new flexible lifetime income option in partnership with TAL.
As regulators spur funds to focus on Australia’s ageing population and overseas players voice their interests, professionals expect a boost in innovative activity in super.
Over half of Australians hope to live to 100 years, according to MetLife, and 90 per cent believe retirement should be redefined to account for a longer lifespan.
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