Super debate too one dimensional: Rice Warner

The research house has taken umbrage at the public commentary of several influential players over superannuation's eternal policy debate.

In a post on its website on Friday, Rice Warner noted the continuous tinkering with the super industry had led to some positive policy outcomes, pointing to the FOFA reforms of 2013 - for revolutionising and "totally disrupting" the financial advice industry - and the introduction of MySuper and SuperStream as examples of Australia's penchant for refining the system's parameters and weeding out "areas of inefficiency or unfairness."

However, with the government's review of the retirement income system not far away, the firm went on to say the public discourse surrounding the debate of superannuation policy tended to focus only on single issues at any one point in time.

"Unfortunately, most of the public discourse tends to focus on single issues at a point in time.  Should the SG rate go to 12%?  Is the means test a disincentive to save?  Do tax concessions reduce the cost of the Age Pension?  Will adequate retirement incomes be achieved?" Rice Warner said.

"This is understandable in the context of the daily news cycle as it is difficult to summarise complex issues (on which experts cannot agree) into a one-page article."

However, the firm said while there was difficulties inherent in those ongoing policy debates, commentary on the Age Pension was "notorious for being poorly researched or presented without context", going on to lambaste both Challenger and the Grattan Institute - whom Rice Warner has engaged in an ongoing battle with recently over the SG - for their recent research efforts.

"Challenger released research showing that half of people aged 67 do not receive the Age Pension, arguing this showed superannuation is doing its job," Rice Warner said.

"While the conclusion is correct, many of those not receiving a pension are still earning income, so they are not self-funded retirees and may receive the Age Pension when they stop work."

In Grattan's case, the researcher said the institute had argued an increase in the SG will both cost the government money and see Australians on middle incomes fail to benefit due to a reduction in eligibility for Age Pension payments.

"Others have commented (erroneously) that there is still an impending ageing crisis that will blow out the Age Pension bill in future years," the firm said.

But according to its own research, the super industry is doing its job by reducing the nation's reliance on the Age Pension.

"The cost of the Age Pension is expected to reduce from 2.6% of GDP to 2.1% by the end of the century. Our national spend on state pensions, as a percentage of GDP, is amongst the lowest, and is trending down whilst the trend in most other countries is up," Rice Warner noted.

"The future experience is conditional on strong real GDP growth of 2.5% p.a. in the long term, which is itself dependent on continued immigration which slows down the impact of population ageing."

Rice Warner said the cost of the age pension was the result of the "complex interactions of multiple policy settings".

As a result, the firm warned against policy changes following the trend of the public debates, and urged an "integrated approach" in the retirement income review.

"Our system is complicated and often fragmented," the firm said.

According to the firm, policy changes made in isolation have increased the complexity of the super system, thus undermining its confidence.

With the retirement incomes review upcoming, the firm said there was an opportunity for an integrated approach, but warned it would fail if it contributed to the "growing mountain of "technical debt" from decades of ad-hoc policy development."

Read more: Age PensionRice WarnerSGChallengerGrattan InstituteMySuperSuperStream
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