Boosting Retirement Savings in Australia
Added on 2019-11-25
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1THE AUSTRALIAN SUPERANNUATION SYSTEM Student’s Name Professors Name College Course Date
2THE AUSTRALIAN SUPERANNUATION SYSTEM Helping the rich save for retirement”: Does Australia’s superannuation system favour the rich compared to the poor? Through the years, there have been constant public debates about the quantum and equityof tax concessions for superannuation. The primary arguments that surround this have been embedded on recent government budgets in the face of fiscal challenges as well as the supernatural and high account balances. Given the nature of this intense debate, it is crucial for conversations and decision making to take place using an accurate information lens. Currently, Australia faces an aging population with the characteristics of escalating pension as well as aged care expenditure. A well-deformed debate on the case study will lay the foundation for community stakeholders and the government to reach a stable consensus on the potential ways through which the current superannuation system can be made equitable and sustainable. It is likely that the government will face challenges in its attempts to set a tax framework policy aiming at accommodating the expenditure involved in supporting older generations in their retirement years1. In relation, it is important that the debate is accurate and is not based on myths that may be credited to inaccurate data or analysis and assertions that lack sufficient evidence. The role and aim of Australia’s tax concessions for superannuationOne primary argument that research findings suggest is that superannuation saves the government approximately $7 billion regarding age pension expenditure yearly/annually. Also, the savings are expected to increase as the system matures. Subsequently, this is contrary to the widespread myth that superannuation does not help in reducing the government spending with 1Scott Donald, Hazel Bateman, Ross Buckley, Kevin Liu, and Rob Nicholls. "Too Connected to Fail: The Regulation of Systemic Risk within Australia's Superannuation System."(Journal of Financial Regulation2, no. 1 (2015): 56-78).
3particular regards to the age pension. Superannuation has proved to be a complementary technique to age pension since it boosts incomes and provides a lifestyle in retirement. Statistics point out that 32% of individual aged 65 in 2013 were comprehensively fully self-funded in retirement in retirement up from the 22 per cent in 2000. It is projected that the number will rise to 43% by the year 2023. According to this year’s report released by an Intergenerational report (IGR), the reliance of younger retirees on a scale of full age pension is quickly dropping. However, this statistics is not a reflection of the reliance on the age pension falling. Technically, this is because the Intergenerational Report examines all retirees and not just those that turn 65. It is likely that the tightening of the asset test will reduce the percentage of retirees that receive the age pension2. One particular challenge that is encompassed in the system is ensuring retirees have sufficient adequate superannuation in retirement. This is in particular regards to the later years of the retirement of the retirees. Reforms like increasing the superannuation guarantee from9.2 to 12% as well as the development of longevity products will automatically add the pressure to the age pension. As a result of people having superannuation savings, approximately $7 billion annually is cut from the age pension. The figures, however, are expected to increase in the future years as more Australians continue to retire with superannuation balances. Subsequently, this includes: Approximately $1 billion in savings from 150000 people an inclusive of many defined benefits schemes. 2David Ingles, "Does Australia need an annual wealth tax? (And why do we now apply one only to pensioners)."(Browser Download This Paper 2016).
4Over $3 billion in yearly savings from 160000 people with super balances who are eligibly fully self-funded.Around $3 billion in the form of savings from 500000 individuals that receive $5000 on average Current tax concessions advantage on high wealth individualsAlthough there some counter arguments that argue that its majorly high-income earners that benefit from government support regarding retirement. On the contrary, it is true to say that financial assistance for retirement that is provided by the government can be considered broadly comparable across the personal income tax brackets. The nature on the ground is that all Australians get access to financial support for their retirement through either tax concessions to fund their retirement through superannuation or age pension. At times, individuals use a combination of both. True to say, all Australians receive approximately $300000 across all tax brackets. Subsequently, this is a direct contribution of the government to their retirement. The main difference, however, is embedded in the timing and vehicles through which it is delivered. A relevant example is that the full age pension for a single person is technically at $22,542 annually3. Tax concessions for superannuation technically are for smaller annual amounts that are spread over some years. Simply put, all individuals receive the same government assistance regarding retirement benefits. The only difference is that the timing and vehicle through which the same is delivered comprehensively differs. To extensively explain this further, a lower income person will receive the compensation in the form of age pension, low-income 3Panha Heng, Scott J. Niblock, and Jennifer L. Harrison. "Retirement policy: a review of the role, characteristics, and contribution of the Australian superannuation system."(Asian‐Pacific Economic Literature29, no. 2 (2015): 1-17).
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