Chair of the 2010 Super System Review and Challenger chair of retirement income, Jeremy Cooper, has said the superannuation industry should expect a shake-up between the relationship of superannuation and the age pension.
Speaking at the ASFA Investment Interchange conference, Mr Cooper said the decoupling of superannuation and the aged pension will be a “big theme that we’re all going to have to deal with”.
There will be greater numbers of people deriving income in retirement purely from their superannuation rather than relying on a part or whole pension, which is broadly the case for those in retirement at the moment, he said.
“The two are going to separate and the aged pension will be much more expressly a safety net – not something the middle class and lower middle-class people are aspiring to be on at all,” said Mr Cooper.
Mercer senior partner David Knox had a similar view of the issue.
Mr Knox said while the aged pension is still used, to some extent, as longevity protection for part of the population, fears exist as to what the pension will be in 10 years’ time.
“The real value of the pension, I think, will inevitably decline and I also think it’s inevitable the means test will be harder,” he said.
“So it will be harder to get and smaller in real value.”
Relying on the aged pension in the future will therefore be a gamble, he said.
“We need it as a safety net but it’s not going to be easy to get,” he said.
“For the baby boomers coming through, I wouldn’t be relying on it.”
Mr Knox said it is also likely Australia will change the way it indexes the pension, indexing to CPI or an equivalent as most countries do now rather than to wages as Australia currently does.
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