A sweeping review of the nation's retirement income system will canvass the age pension, superannuation and voluntary savings including the family home, and how they affect the budget and deliver financial support to older Australians.
Treasurer Josh Frydenberg on Friday released the terms of reference for the review, which was recommended in January by the Productivity Commission.
Former senior Treasury official Michael Callaghan will head the government's review of the retirement income system.Credit:Daniel Munoz
Noting that retirement incomes were based on three pillars - a means-tested aged pension, compulsory super and voluntary savings - the terms of reference require the review to establish a "fact base" of the current system.
It will then identify how the retirement system helps supports people in retirement, the role each pillar plays in that support, distributional impacts across the population and over time as well as the impact of current policy settings on public finances.
Mr Frydenberg on Friday acknowledged the review would be wide-ranging.
"The review will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages," he said.
A three-person panel headed by former senior Treasury official Michael Callaghan will run the review. He will be joined by Carolyn Kay, a member of the Future Fund's board of guardians, and Deborah Ralston, who is a member of the Reserve Bank's payments system board.
A consultation paper will be released in November, with the final report due by June.
The Productivity Commission urged the government to undertake the review before "any increase in the superannuation guarantee rate". The guarantee, which is the amount of compulsory super that must be paid to employees, is scheduled to rise from 9.5 per cent to 10 per cent by 2021, before reaching 12 per cent by 2025.
Several Coalition MPs have been pushing back against the legislated timetable, arguing workers need pay rises now, not savings for their retirement. They have also raised concerns about the efficiency of the overall system, which has seen some workers in underperforming funds up to $188,000 worse off.
The commission said the inquiry should examine the net impact of compulsory super on private and public savings and distributional impacts across the population. It said interactions between superannuation and other sources of retirement income and the impact of superannuation on public finances should also be analysed.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra
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