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Confusion over retirement income objectives

A growing chorus of industry stakeholders agree that the retirement income system lacks a clear objective, but the comprehensive government review found the industry cannot agree on what that should be.

The Retirement Income Review report found the role of the pillars - superannuation, savings and the Age Pension - have to be determined in terms of how they can contribute towards achieving the system's objective.

Many submissions the government received highlighted the absence of a clear and agreed objective as "a significant shortcoming".

"An agreed objective is needed to anchor the direction of policy settings, help ensure the purpose of the system is understood, and provide a framework for assessing the performance of the system," the report read.

It does suggest that the objective for the retirement income system delivers adequate standards of living in retirement in an equitable, sustainable and cohesive way. But this is "ambiguous" and must be elaborated.

In terms of retirement income being "adequate", the report suggested that this needs to be clarified.

Having adequate income to support living standards in retirement is not "building wealth per se or facilitating estate planning". It is about providing a safety net so that older Australians achieve a minimum standard of living in retirement and avoid living in poverty.

The concept of "equity" in the system must be clearly defined and the review offered two suggestions. The first is that the system should target government support (such as the Age Pension and superannuation tax concessions, health and aged care services) to those in need. The second being that people in similar circumstances should have broadly similar retirement outcomes.

While it was beyond the remit of the review to determine the objective for the system or the role of the pillars, that should be left in the hands of the community through the government.

"If the aim is to achieve consistency in the direction of retirement income policy and improve community understanding, the objective should be settled and not be subject to frequent change. For these reasons, it would be preferable if the objective for the retirement income system was legislated," the overview report read.

Read more: SuperannuationAge PensionRetirement Income Review
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