The Grattan Institute believes increasing rent assistance would be the best tool to assist people at risk of poverty in retirement, rather than proposed increases to the compulsory superannuation guarantee.
In its submission to the Morrison government’s retirement income review released on Monday, it says the proposed increase in compulsory super from 9.5 per cent of wages to 12 per cent by 2025 should be abandoned.
“Forcing the entire workforce to save more for their retirement by increasing compulsory super is exactly the wrong way to prevent senior Australians suffering poverty in their later years,” the submission’s lead author Brendan Coates says.
Ditching the legislated increases will save the federal budget $2 billion in super tax breaks.
The institute believes retirement incomes are “broadly adequate” but there is room to reduce excessively generous tax breaks that largely benefit wealthier Australians with the resources to fund their retirement.
The super system provides tax breaks that cost the budget $35 billion in lost revenue each year, with half the benefits flowing to the top 20 per cent of income earners.
“These excessively generous tax breaks should be wound back,” Mr Coates says.
He says the retirement income system is failing too many poorer Australians, especially retirees who rent, including many women.
“The proportion of retirees who rent and are therefore at risk of poverty in retirement will increase in future because home ownership is falling,” he warns.
Among the institute’s recommendations, it calls for a 40 per cent lift in the Commonwealth Rent assistance immediately, a lift in Newstart by at least $75 a week and ensure super funds cut their fees.