Coverage of the IPA’s recently released report, “Strangling the goose with the golden egg” by Rebecca Weisser and Henry Ergas appeared in The Australian today. The report outlines that the purpose of a retirement income system should be to enable people to maintain their living standards after leaving the workforce, but that middle-income Australians are poorly served by this system. From The Australian:
Both major parties are condemning middle-income Australians to a dependency on the Aged Pension by targeting superannuation for budget repair, a report from the Institute of Public Affairs says.
As the government prepares to tweak its election commitment to rein in superannuation concessions, the free-market think tank says the government’s “desperation” for new revenue sources, as outlined in its $6 billion superannuation tax package, will undermine future retirement incomes.
The release of the report comes as Scott Morrison seeks to reach a consensus with Coalition backbenchers on the shape of the government’s super reforms, with MPs arguing for the Treasurer to lift the cap on non-concessional contributions from the proposed $500,000 to $1 million.
… Institute director of policy Simon Breheny said instead of targeting retirement income to fund spending commitments, the government should cut superannuation taxes of middle Australians to encourage savings.
Mr Breheny said middle-income earners could expect to have a retirement income equal to 58 per cent of their pre-retirement earnings, compared with nearly 90 per cent for low-income earners.
“The poor have the pension, the rich have alternative investments and the middle class will miss out again. The objective of the superannuation system should be for people to maintain their living standards in retirement, not imply that they should be grateful to be tied to the Age Pension,” Mr Breheny said.
… “Unfortunately, proposed changes to superannuation from both the government and the opposition worsen, rather than fix the system’s myriad weaknesses,” the report says. “Superannuation reforms should be judged by the effect that they have on helping each individual to accumulate sufficient funds to maintain their living standards in retirement.”The report also concludes that the government’s proposal to introduce a cap on non-concessional contributions and lower the concessional contribution cap will “make a bad situation worse”.
“What is clear is that governments should not tax retirement savings at rates that make it difficult or impossible for savers to secure reasonable living standards in retirement based on the living standards they achieved during their working life. Nor should government taxes on retirement savings distort consumption decisions, undermining the quality of life in old age and reducing overall economic efficiency.”