While the review is believed to be an end to age-old debates about whether there will be an age pension in future by showing how critical this element is to the system,Coates says there are still some areas in need of improvement.
The safety net
Not every retiree is financially comfortable and the system leaves two cohorts behind in particular. Those who rent and those forced into retirement earlier than they'd anticipated are the most likely to face financial stress. While there are no silver bullets to help these groups of people,Coates says the social safety net is critical to help those without enough money to get by,including a potential increase in JobSeeker for those who are forced out of work or without a home of their own.
"Rent assistance and the rate of the pension received by retired renters is a big problem,"he says."It's clearly inadequate. That's one area we'll need to look at."
The review did consider whether hiking rent assistance by 40 per cent would relieve retired renters from financial stress (the current maximum payment for singles is $139.60). It found such a hike would not be sufficient and a large increase"would not have a meaningful impact",meaning alternative approaches are needed.
One way to shift the dial is to increase home ownership rates. The review clearly shows the importance of owning a home,prompting fierce political debate about whether letting workers dip into their super for a house is a suitable use of retirement funds. The idea is staunchly opposed by Labor,unions,super funds and former prime ministers Paul Keating and Kevin Rudd. But it has also encouraged a broader discussion about affordability.
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"The big elephant in the room here is housing,"Coates says."We know that home ownership is going to fall over in the next 40 years because housing has become less affordable ... People haven't quite grappled yet with what this means[for future retirees]."
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck is hoping the review will prompt the federal government to reform capital gains tax and look at the barriers affecting major investments in affordable housing.
"If we are serious about making home ownership more affordable and providing more financial assistance to those having to rent in retirement,then we need to look at policy levers outside the retirement system,"Scheerlinck says.
Superannuation and salaries
The $3 trillion superannuation system has received the most public and political attention from the entire report so far. Tensions between the government and the super funds heated up this year after a Morrison government scheme this year allowed struggling workers to withdraw up to $20,000 from their funds to get them through the coronavirus pandemic-induced recession. The review backed the policy,saying it was consistent with helping balance pre- and post-retirement living standards,but funds are concerned about the effects on long-term balances. Piggott says it's"easy"to dip into super for all sorts of things but it should be carefully protected.
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"Governments on both sides of politics have held the line on that quite well and that hasn't been the case with similar systems internationally,"he says.
The third pillar,voluntary savings,has become contentious largely because saving for retirement inevitably means earners trade off this money with what they have available to spend during their working life. The report says the evidence shows increases in the superannuation guarantee come largely at the expense of pay rises and this will be the case for the next hike in the superannuation guarantee,scheduled to kick in from July 2021,when employers'minimum super contribution will rise 0.5 per cent to 10 per cent.
Scheerlinck says not everyone is affected in the same way,with those in lower-paid work more likely to"rely on legislated minimum wages and minimum superannuation guarantee"to see their wealth increase. The review also says raising the guarantee would make the system less equitable and less sustainable because top earners would benefit the most from the tax breaks that come from super accounts. Scheerlinck does not disagree but instead says fixing tax concessions rather than backflipping on the super guarantee rise would be preferable.
She particularly urges policymakers not to see the review as the"only source of truth about the system". Regardless of this warning,the wide-ranging report will shape the way politicians and researchers view the incomes of retirees for years to come. The big concern now for Morrison,Frydenberg and Hume,as they decide how to increase the retirement incomes of all workers,is ensuring their changes improve rather than undermine the system.