Think tank calls for pension and superannuation overhaul
Article by Roisin Kelly-GoldsmithIn a new report a think tank has criticised the Australian pension system where taxpayers pay a significant portion of their income to support pensioners whilst still paying their own superannuation.
Average workers are expected to contribute $3,500 a year for “someone else’s retirement” compared to $6,270 for their own in superannuation, said The Centre for Independent Studies.
Titled “The myths of the generation bargain”, the CIS paper examined generational changes to the pension and how it compares to current standards of living and wages.
Researcher Simon Cowan said that the metrics in the release showed today’s pensioners have a better bargain than previous generations.
“Today’s retirees, who in their past working life paid a smaller proportion of their salaries to support the retirees of that time, now demand a greater proportion of the salaries of those working today,” Cowan said.
CIS revealed that if policies remain the same, by 2054 the average worker will contribute $9,424 to pensioners and only $11,895 to their own in superannuation.
The paper also noted that to accumulate half a million dollars in superannuation today, Australians would have to be earning much more in income than average to do it. This doesn’t help considering Australians are living longer and healthier lives now more than ever and thus require a robust nest egg.
As a result, CIS is calling on the government to make five policy changes which include increasing the retirement age and including the family home in means testing for pension eligibility. Other suggested changes to superannuation include restricting withdrawals from retirement funds early.
Things you could do now to plump up your nest egg if you’re near the retirement age:
Choose short term investments such as term deposits
Take advantage of high interest savings accounts
Consider downsizing your home to fund a more comfortable retirement
Nest egg tips for workers with more time between now and retiring:
Research and choose your superannuation fund wisely. You might find switching funds will be beneficial for your situation
Don’t withdraw money from your super and find other ways to retrieve funds such as taking out a low cost personal loan instead
Diversify your investments for long haul success
Top up your super if and when you can afford to