The retirement system in Australia needs to be completely reworked with wholesale changes instead of piece-meal efforts, with issues such as pre-tax mortgage repayments and superannuation being made available for owner-occupied home purchases to be put on the table.
At the same time, the objectives of the retirement system need to be clarified and confirmed which would remove confusion among the public, industry and government, according to the Committee for Economic Development in Australia (CEDA), chief executive, Professor the Hon. Stephen Martin.
“There has been a lot of talk and tweaking of retirement policy aimed at reducing the burden on government, but what Australia needs is a robust discussion on all the options to ensure long term Australians can retire comfortably,” Martin said.
“The system needs to be reviewed in its entirety. Ensuring retirement policies are not too onerous on the Federal Budget should be an outcome, but the focus must be on ensuring a sustainable system that delivers an adequate living standard for retirees.”
Martin said Australia’s ageing population and its’ impact on retirement policy has been discussed for many years but the issue sustained housing affordability has only recently come to the fore as a significant issue for retirement policy.
He claimed that if this was not addressed there was the likelihood that more people would be living in poverty in retirement placing more pressure on the Federal Budget.
Martin stated there were a number of options that could reshape retirement policy in Australia and they should all be examined for their merits in the current environment.
“Obviously taxation arrangements need review because currently concessions are benefiting the rich and are being used as tax mitigation measures rather than to encourage retirement savings. However, the other area that needs review is the treatment of the family home,” he said.
“One option would be make the family home part of the assets test for the Age Pension and change superannuation payments to an after income tax payment, with all other super tax concessions removed.
“Alternatively, mortgage payments on the family home could be allowed to be made pre-tax.
“Implementing one of these options would allow for two important components of retirement savings — superannuation and the family home — to be treated the same.”
