Back before the world was turned upside down by COVID-19, the Government announced they were implementing a review of Australia’s retirement income system.

The findings of the review panel was delivered to the Government at the end of July 2020, however it wasn’t released to the general public until 20 November 2020.

The one thing absent from the final report are recommendations. But then, that wasn’t the purpose of the review.

The purpose of the review was to establish a fact base of the current retirement income system in the context of an ageing Australian society.

The objective was to improve people’s understanding of the system’s operations and the outcomes it delivers for Australians.

While the review was not intended to deliver specific recommendations, the review will no doubt be used as a basis for determining future government policy when it comes to addressing the retirement income needs of Australians.

In their report to the government, the panel presented 32 key observations. The general conclusion of the review was that evidence indicates that the Australian retirement income system is effective, sound and broadly sustainable – but it can be improved.

The current retirement income system is based on three pillars:

1. Means tested age pension – the level of support available is based on an individual or a couple’s assets and income, and their age. The age pension becomes payable between ages of 65 and 67, depending on a person’s date of birth.
2. Compulsory superannuation – generally this relates to superannuation savings that accrue from compulsory superannuation contributions made by employers. Currently, employers are required to contribute an additional 9.5% of an employee’s salary to superannuation. This is legislated to increase to 10% from 1 July 2021 and will progressively increase to 12% by 1 July 2025, although there is current debate about the sustainability of future increases for employers, particularly in a post COVID-19 world.
3. Voluntary savings, including home ownership – voluntary savings include additional superannuation contributions from both pre and post-tax income, savings held outside the superannuation system, and access to equity held in the family home, be it by downsizing or the use of an equity release or reverse mortgage type arrangement.

Australia’s retirement income system is complex, and it needs to be better understood by all stakeholders, including those that benefit directly from the system. The panel found that part of the complexity arises from the interaction with different systems including superannuation, social security, aged care, and the tax system.

The retirement income system is dominated by groups with competing interests. It’s agreed that the focus needs to shift to delivering outcomes that are in the best interests of the community as a whole, and not simply special interest groups that might seek to obtain an advantage for those sectors they represent.

Importantly, the panel observed that the system needs to deliver adequate standards of living in retirement. The report suggested a common objective for retirement income needs to be developed - one that focuses on providing an adequate level of income that is delivered in an equitable, sustainable, and cohesive way.

The report is an interesting read, but my concern is that it will be confined to a bookshelf instead of being used by the government to pursue a ‘root and branch’ review of the retirement income system. It’s more likely that an odd idea or two will be cherry-picked and will form the basis of a piecemeal approach to policy reform.

I sincerely hope I am wrong and that the government takes the findings of the review as a basis for constructing a retirement income system that is adequate, equitable, sustainable, and cohesive, and is in the best interests of the community at large.

Only time will tell!