How Keating's super plan missed its target

By Rob Burgess

That wide-ranging report tackles many problems in the super framework, but some of its findings show a growing number of asset-poor Australians over 65 living on less than the "60 per cent poverty line", defined by the Australia Council of Social Service as being 60 per cent of the median wage.

The key take-out of the report is that the super guarantee as part of the ‘social wage’ is failing the bottom third of retirees, who have seen the real value of pension payments eroded but have not developed super nest-eggs to offset the difference.

The answer, spelled out in great detail in the Per Capita report, is that the benefits of the superannuation and tax settings ensure that the super system is regressive in nature ­- the richer you are, the more you can put away, the more tax you can avoid paying, and the less you will need to rely on a paltry government pension in retirement.

If a third of Australians retire below the ACOSS defined “60 per cent poverty line”, super is not providing what Paul Keating envisaged.

Around 60 per cent of capital raisings come from super funds — a fact that has been credited as ‘saving Australia’during the more than $200 billion of balance-sheet repairs undertaken by Australian firms during the GFC.

The report quotes an ACOSS finding that “over a third people over 64 still live below the 60 per cent poverty line.

The report notes: “At the time of the Harmer Pension Review, 15 per cent of people in the top net wealth quintile reported receiving the age pension …

If one were able to take a factory worker retiring in 1990, with a small company pension and a full government pension, and transplant them into 2014, they might just calculate that they’d prefer to travel back to the time in which the super guarantee did not exist.

Read more here: Business Spectator

    

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