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A simpler system would be super

In the past year, reports by the Productivity Commission and the banking and financial services royal commission have prompted intense and commendable consideration about the direction of Australia’s retirement and savings policies. Superannuation should not be as cruelly complex as it is. While the system’s basic concept is elegant – providing workers with a compulsory employer-paid super contribution equivalent to at least 9.5 per cent of salary – the confounding rules, layers of costs, tax benefits and snags are enough to break the head of anyone trying to save for retirement.

Retirement policies should be designed to encourage individuals to save as much as they can for later life.

Retirement policies should be designed to encourage individuals to save as much as they can for later life.Credit: Greg Newington

Worse, though, is that many Australians will not have saved enough independently, nor earned sufficient through their superannuation accounts, to provide themselves with a comfortable life in retirement. As a greater proportion of the population moves into the retirement phase – and a smaller, younger proportion of workers is relied on to pay taxes to fund the whole population’s healthcare and so on – future generations simply will not be able to rely on government-funded pensions in retirement. Yet the existing superannuation system is failing to generate the sorts of sums that will be needed for privately funded pensions.

Those are just some of the many reasons the Morrison government’s decision to conduct a sweeping review of the nation’s retirement savings system is so necessary. One generation after compulsory superannuation was implemented, it is time for a wide-ranging review of how the aged pension, superannuation and voluntary savings (including the tax-free home) interrelate.

The retirement savings review was recommended by the Productivity Commission in its hefty and highly detailed examination of the superannuation industry, published in January. It urged the government to consider all aspects of the retirement system before lifting the superannuation guarantee from 9.5 per cent to 12 per cent by 2025.

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