Australia's "broken" superannuation and pension systems are condemning a growing number of retirees to financial misery in their sunset years.
More than one in five Australians live in poverty when they retire. And that number is growing.
With housing affordability at an all-time low, many Australians now face the brutal double whammy of going through their entire working life unable to afford a home and ending up in poverty when they retire.
But there's a simple change the government could make to slash the nation's embarrassingly high rate of retirement poverty. It could reduce or remove the massive concessions to those retiring with millions of dollars and use that money to increase to the Age Pension.
It could also allow older Australians to earn income to supplement the Age Pension.
New research by the Australia Institute has found that Australia spends almost as much giving tax breaks to wealthy retirees as it does providing a safety net, the Age Pension, to those with little or no retirement savings.
The research compares Australia's superannuation scheme and Age Pension program to the equivalent systems in Sweden and Norway, nations with comparable GDP's to Australia.
Key findings:
- 22.6% of Australian retirees end their working lives in poverty, compared to 11.1% in Sweden and 3.8% in Norway.
- Australia spends 5.29% of GDP on the Age Pension, Sweden spends 9.09% and Norway spends 9.30%.
- The Australian government foregoes nearly $38 billion a year in superannuation tax concessions.
- If this money was redirected into the Age Pension, significantly fewer Australians would be poor at the end of their working lives.
- 10% of Australians reach the age of 65 with a super balance of $1 million. These people hold 51% of the nation's overall super.
"This report highlights the broken nature of Australia's retirement system that leaves many people living in poverty," said Greg Jericho, Chief Economist with The Australia Institute.
"Rather than ensure people are able to retire with dignity, Australia's superannuation system is geared towards reducing tax for the wealthiest in society. Sweden and Norway show that there are better ways of doing things.
"A large number of Australian retirees still rely on the pension as their main source of income, yet we spend less on public pensions than countries like Sweden and Norway. At the same time, our super system offers massive tax concessions that mostly benefit the wealthy. These concessions cost us nearly as much as spending on the Age Pension. We should be supporting retirees who are truly struggling.
"Living in poverty is always hard, but the current cost-of-living crisis makes it even more difficult for retirees to meet their basic needs. If we reduce the inequitable superannuation tax breaks given to high-income earners we can reduce poverty among retirees. It's time to take action and give them the support they deserve."
