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(May-2004) Govt rejects income benchmark
The Federal Government is indicating it may pick up at least some of the recommendations contained in a submission developed by a coalition of 14 business organisations, but has dismissed the adoption of a retirement savings benchmark set at 65 per cent of pre-retirement earnings.
Instead, the Government is prepared to rely on the existing superannuation guarantee system in combination with the aged pension and initiatives such as the new co-contribution regime for low income earners.
At the same time as questioning the commitment of the coalition of business organisations to meaningful reform of the superannuation regime, Assistant Treasurer Senator Helen Coonan has made clear that the Government is prepared to review a number of issues, including extending the new co-contribution regime further up the wages scale and injecting more flexibility into the system.
However she suggests that the coalition’s calls for cuts in the taxation regime being applied to superannuation ring hollow when they do not, at the same time, offer a trade-off with respect to cutting their own fees.
Coonan says that the business coalition has laid out a $5 billion wish-list for super without one mention of a quid-pro-quo on fees to help boost savings.
“While the Government welcomes debate on superannuation, unilateral calls for further concessions make the industry vulnerable to charges of self-interest,” she says.
Senator Coonan says the calls from industry would be a lot more convincing if they were accompanied by some action from the superannuation industry itself to relieve the impost that super fees and charges have on the retirement savings of Australian workers.
At the same time, she outlined the Federal Government’s own formula for growing superannuation which she says is based on Treasury modelling.
“Treasury analysis indicates that the super guarantee system, combined with the improved aged pension, will produce net replacement rates in excess of 76 per cent for even those on median earnings after 30 years of contributions or 85 per cent after 40 years of contributions,” Senator Coonan says.
She says that to boost retirement savings, the Government prefers incentives such as the Government’s $1.1 billion co-contribution for low income earners.
Senator Coonan says the suggestion made by the coalition of business organisations that the co-contribution policy be extended up the income scale has some merit.
She says any further concessions in the superannuation arena will need to be balanced against other spending priorities such as health, education and defence.
AUTHOR
Mike Taylor
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