Super system lacking ‘political cohesion’, says Rice Warner
There is “alarming divergence” between policy makers regarding a unified and measurable set of long-term objectives for superannuation, according to Rice Warner.
The research provider said that as the superannuation industry explores ways to solve the real savings gap, arguments for resolving the gap in policy have also intensified.
Rice Warner argued it is time to “finally agree on measurable bi-partisan objectives against which Treasury can benchmark policy changes”.
“David Murray’s Financial System Inquiry (FSI) indicated that a lack of clarity exists when it comes to the objective of superannuation,” said Rice Warner.
“It suggested the primary objective should be 'to provide income in retirement to substitute or supplement the Age Pension'.”
These comments, Rice Warner noted, were made against a “historical backdrop of policy tinkering with superannuation, and a lack of political cohesion as to the ultimate purpose of the system”.
The researcher said there are therefore two gaps in the system: the superannuation savings gap and the policy distance between the two major parties where “sensible reform is often put aside in favour of political expediency”.
“A good example is the current government’s reluctance to address inequity in superannuation,” said Rice Warner.
The government’s decision on the superannuation guarantee rate is a good example of how politics has impacted upon the savings gap, the researcher said.
“We have seen the Savings Gap increasing over time, most recently to $768 billion at 30 June 2014, up from $727 billion the previous year,” Rice Warner noted.
“The single government policy that had the biggest impact on this movement was the deferral of the increase in the Superannuation Guarantee from 9.5 per cent to 12 per cent by a further four years. This deferral added $118 billion to the gap.”
Bi-partisan agreement would also result in “consensus on raising the preservation age and simultaneously seeking to promote work for older Australians”, according to Rice Warner.