Govt urged to review pension asset test changes
The government has been called on to revise the new age pension assets tests coming in next year, with some modelling suggesting significant impacts on retirement incomes.
The Australian Institute of Superannuation Trustees (AIST) and Mercer said modelling in the latest AIST Mercer Super Tracker shows that replacing the current $1.50 test taper rate with a $3 rate will see the level of government support, made up of super tax concessions and age pension, drop by up to 40 per cent for those on average incomes.
According to the research by AIST and Mercer, the top 10 per cent of wage earners will receive double the level of government financial support, between $500,000 and $600,000 of super tax concessions over a working lifetime.
This is double the level of middle-income earners, who will receive $300,000 in government support for retirement, based on the research.
AIST chief executive Tim Garcia said the new test, announced in last year’s federal budget, is extremely harsh and threatens the integrity sustainability of the super system by disincentivising voluntary saving.
“A retirement income system where high-income earners are effectively receiving almost double the financial assistance from the government to save for their retirement than individuals on the part pension is not a fair system nor a sustainable system,” said Mr Garcia.
Mercer senior partner David Knox said Australia has one of the best retirement savings systems in the world – but there is always room for improvement, as there is always a risk with continuous tinkering.
“The doubling of the asset test taper from 1 January next year will hurt many retirees who do not have a large retirement nest egg,” he said.
"An increase in the taper to $2 would be reasonable but a $3 taper is tough, especially in a low interest rate environment.”