The Treasurer wrote to the Australia's Future Tax System Review Panel on 4 November 2008 asking it to bring forward its consideration of the retirement income system. This is to allow the Government to consider the issues facing the retirement income system in conjunction with those arising from the Pension Review due in February 2009.
Australia has a three pillar retirement income system:
- a government-provided Age Pension;
- compulsory savings enforced through the superannuation guarantee (SG); and
- voluntary savings (both through superannuation and other sources).
The Age Pension provides a guaranteed income based on means, while the income generated from the second and third pillars depends on the amount invested and returns on these investments.
The retirement income system has developed over time. The SG pillar will not mature until 2037 when employees retire after a full working life (35 years) of compulsory superannuation contributions of 9 per cent.
Submissions to the Panel support the structure of the retirement income system. Common themes in the submissions dealt with the current rate of the SG and the level of concessions provided to encourage additional saving. Other themes relate to how the system should deal with individuals outliving their savings and how the system treats individuals with different circumstances.
Key considerations about the retirement income system are whether it is broad and adequate, acceptable, robust, simple and approachable, and sustainable.