Age pension for all ‘beats hike in super guarantee’

The pension should be paid to all retirees and super guarantee increase scrapped, ­Mercer says.

There is a growing debate about the efficacy of lifting the compulsory saving rate to 12 per in the wake of a series of damning reports about the system’s effectiveness.

The Age Pension should be paid to all retirees and the legislated superannuation guarantee increase to 12 per cent scrapped, ­professional services giant Mercer says.

In a submission to the government’s review of the retirement income system, senior partner David Knox said scrapping means-testing would simplify the retirement system, remove artificial impediments to downsizing, and provide retirees with peace of mind.

“It is a compelling proposition for a simpler, more effective system,” he said, pointing out that retirees would also no longer have an incentive to engineer their ­affairs to receive the Age Pension.

“Keeping the rate at 9.5 per cent would reduce the cost of projected superannuation tax concessions, increase the level of take-home pay and increase taxation revenue.”

The submission follows growing debate about the efficacy of lifting the compulsory saving rate to 12 per in the wake of a series of damning reports about the system’s effectiveness. Industry super funds launched a TV advertising campaign last week to stop any move to prevent the compulsory saving rate rising to 12 per cent by 2025, as legislated.

One of the architects of New Zealand’s retirement system, academic Michael Littlewood, said “nearly everything was wrong” with Australia’s retirement system. “You have such a complicated means test, plus there’s no evidence compulsion increases saving,” he said.

Research showed German, New Zealand and Australian households had remarkably similarly levels of retirement assets, he said, despite having vastly different retirement systems. “Households tend to wait and see what government is up to, and then adapt their behaviour accordingly,” he said.

“Governments cannot force or bribe (through tax incentives) citizens to save more than they want to save, so they should stop trying.”

Australian-style compulsory superannuation was defeated in a referendum in New Zealand in 1997 by 92 per cent to 8 per cent.

New Zealand residents who have worked there for 10 years or more receive an age pension from age 65 that is currently $NZ21,380 ($20,519) a year for singles.

A member of the 1992 New Zealand government taskforce into pension reform, Mr Littlewood said Australian superannuation advocates should be asked to prove the system was increasing retirement savings.

“After nearly 20 years of no tax breaks for retirement in New Zealand — we got rid of those in 1987-88 — and no compulsion, New Zealanders’ total retirement assets as a share of household wealth was greater than in Australia,” he said. “We had less in superannuation, but we had much more invested in businesses.”

A group of Coalition MPs, including chair of the House of Representatives economics com­mittee Tim Wilson, has agitated against lifting the superannuation guarantee to 12 per cent.

LNP senator Gerard Rennick, one of the group, called the super guarantee one of the “greatest of rorts” in a speech in parliament this week.