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(April-2004) Govt retirement policy draws flak
One of the central planks of the Federal Government’s new retirement incomes policy is being openly questioned by both the retail and not-for-profit ends of the superannuation sector as likely to hurt lower income earners when they enter retirement.
Both Industry Fund Services and KPMG Superannuation Services have questioned the ultimate benefits of the Government’s proposed reduction in the assets test exemption for complying pensions (from 100 to 50 per cent) and changes to the preservation of employer eligible termination payments (ETP).
IFS managing director Sandy Grant has gone so far as to question whether the Government’s policy direction may not ultimately prove to be “the first phase of an assault on the level of aged pension benefits”.
“For a start, those seeking to maximise their aged pension entitlement have had the deduction granted in respect of monies invested in asset exempt annuities for the asset test halved,” he says.
Grant says this has the immediate effect of reducing the retirement income of a significant proportion of people, notably those who are less well off.
“It is worth noting that 75 per cent of those aged 65 receive a full or part pension, so the number of people we can expect to be worse off under the new rules is considerable,” he says.
By comparison, KPMG Superannuation Services senior manager Wayne Hirt says the reduction in the assets test exemption needs to be weighed against the positives in the Government’s policy.
Hirt says the proposed reduction in the exempt percentage of a complying pension for social security purposes appears to be aimed at lowering the participation in the age-pension.
“Further, while preserving employer ETPs may result in Australians staying in the superannuation environment until the member’s retirement, the more likely impact of this measure is that people will become more reluctant to roll over employer ETPs if access will be frozen until retirement, resulting in less accumulated superannuation savings,” he says.
AUTHOR
Mike Taylor
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