Warning over voluntary super
One of the nation's biggest superannuation funds has urged the government to encourage people to make more voluntary super contributions, saying most working-age people will have inadequate savings to fund a comfortable retirement.
Brad Cooper, the chief executive of Westpac's BT Financial Group with almost $60 billion under management, said the current super system would fail to deliver enough to give people a "comfortable" retirement of 65 to 70 per cent of their working-life income.
To lift public confidence in the system, he urged governments to adopt a formal target on how much super should aim to provide in retirement. He also said it was critical members be encouraged to make more voluntary contributions.
However, he conceded that tax breaks should cut out once members attained a certain level of wealth at which they no longer needed incentives to save.
After a heated political debate in recent months on the removal of super tax concessions, Mr Cooper quoted former prime minister Paul Keating's comment that super should aim to replace 70 per cent of a member's pre-retirement income.
In decades to come, he said, super savings would fall short of this target for most people, except for those on about $40,000, who would receive extra government support in retirement.
"While the superannuation system will have $7 trillion in 2033, not every Australian will have what they need," Mr Cooper said at a lunch in Sydney.
"Our superannuation system is one of the largest private pension systems in the world relative to [gross domestic product], but it will be a failure for many.
"To shift most super balances towards a healthy income replacement rate, we need to acknowledge the importance of voluntary contributions in our system."
With retirees set to make up a much larger share of the economy in decades to come, Mr Cooper argued that it also made economic sense to foster a system that would allow retirees to live comfortably, and spend on services.
While the super industry has argued against the removal of tax breaks, the Australian Council of Social Service on Friday said Labor missed the opportunity to make the super rules fairer in its recent changes, which raised taxes on people with more than $2 million in super.
In a budget submission, it argued the government could save $300 million a year by banning "churning" of income through super by workers over 55 - who can sacrifice part of their salary into super and then pay themselves an equivalent super benefit.