Mercer calls for total retirement income perspective
Thursday, 17 March 2016 11:44am

In response to the Federal Government's objective of superannuation discussion paper Mercer called for clear short and long term objectives to provide secure retirement for all Australians.

In a statement Mercer welcomed the government's invitation for industry consolidation to define the objectives but hopes the objectives will be defined with a total retirement income perspective and long term view in mind.

Mercer senior partner, David Knox argued that for the objectives to be defined correctly the government must define the objectives of both superannuation and the age pension simultaneously.

"Super should provide an income throughout your entire retirement, it is not intended for wealth accumulation and estate planning. We need to lock this into the overall objectives now to ensure an adequate and sustainable retirement income for Australians and to protect against ongoing tinkering," said Knox.

Mercer argued that alleviating fiscal pressures on the government also needs to be addressed in the objectives, claiming that the costs of age pension and superannuation tax concessions must be considered in combination over the longer term.

"The cost of super tax concessions to the government is only part of our retirement savings and should not be considered in isolation. Concentrating on only one component will adversely affect the development of a sound and sustainable retirement income system," said Knox.

"It is not enough to state that superannuation should substitute or supplement the age pension. We need a clear and sensible line in the sand as to when it should move from supplementing to becoming a substitute and some rationale and clarity around the rate of substitution."

As part of the consultation process Mercer's submission will propose a rationale for the long term relationship between the age pension and superannuation.

"We firmly believe the objectives of superannuation must include a whole-of-life approach, including reference to how longevity risk may be managed. Longevity risk is one of the biggest risks facing retired Australians as the length of their retirement is unknown and therefore ensuring their savings last as long as they do is challenging.

"There are potential short-term gains for the government to have objectives enshrined in legislation - but it is important we don't lose sight of the long-term opportunity here. It's a good idea, let's just make sure we do it properly," concluded Knox.

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