Retirees Said They Can Live Fast And Die Old

Mr Cooper’s comments follow the release of a position paper by the Commonwealth Treasury on Monday, which examined the need for super funds to develop strategies that would encourage people to withdraw all of their super balances to the retirement.

Challenger’s findings are consistent with previous research by the Grattan Institute, which found that pension tax breaks cost the budget more money than they save through lower retirement payments.

The Grattan Institute’s economic policy program director Brendan Coates said the super tax breaks cost the budget $ 35 billion a year in lost revenue “with half the benefits going to the top 20 percent, who have already have enough resources to finance their own retirement ”.

Great ‘missing a main goal’

While the Treasury wants retirees to feel comfortable dipping into their retirement savings, critics say tax breaks and other government policies are encouraging seniors to accumulate large balances.

The Morrison government temporarily halved the minimum retirement pension rate in March 2020, reducing the amount of assets retirees would be required to sell during a period of market volatility.

But the government subsequently extended the measure until 2022 in this year’s federal budget, despite the stock markets posting solid gains over the past year.

Mr. Cooper said the move “almost sends the opposite signal” to the Treasury paper.

“I think it was probably an impending election that is causing this,” he added.

Workplace pensions spokesman Stephen Jones said the policy made sense “at the height of the pandemic” but said “there was a question whether it was still valid” now that asset markets had recovered.

Liberal MP Tim Wilson said the problem was that “super doesn’t have a primary focus.”

“Industry funds think this is their way to wield power, some see it as a means of transferring wealth and minimizing taxes – and the problems stem from there,” he added.

Retirees can ‘easily afford’ more expenses

Retirees could “easily afford” to spend more money, Challenger’s Cooper said, which would improve their own quality of life and boost economic activity.

He said older Australians would be more willing to withdraw their retirement balances if they had more confidence in the system and if there were more annuity-type products available to them, like the ones that Challenger offers through the funds. of retirement.

If retirees took an additional 1.5% of their super balance each year, they would have an additional $ 4,300 to spend each year, resulting in a $ 9 billion increase in gross domestic product, according to a study by Challenger and Mercer.

Mr Cooper said retirees were maintaining unnecessarily high levels of savings to fund future spending on elderly care and health care, which would not be as costly as they feared.

“It really is an American idea if it is true … For most Australians, the government subsidizes massively [these costs]. “

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