The role of superannuation could become “even more crucial” if changes to the age pension are carried out, according to the Association of Superannuation Funds of Australia (ASFA).
Changes to the age pension include increasing the eligibility age to 70 or changing the indexation method to a less generous approach, AFSA said in a statement.
Such changes would reinforce the need for superannuation guarantee contributions to rise to 12 per cent of wages and for assistance for low income earners in the form of the low income superannuation contribution (LISC) to continue, ASFA added.
ASFA chief executive Pauline Vamos said, “moving from indexing the age pension to the greater of the increase in the Consumer Price Index (CPI) or average wages in the community would make a big difference to the age pension payments individuals and couples would receive.”
“If the age pension had been indexed to only changes in the CPI over the period from the year 2000 to now, the age pension for a single person would now be some $7,000 a year less,” she added.
Ms Vamos said the impact of increasing the eligibility age for the age pension is “less clear cut”.
“If an individual works for three years longer, they will have more superannuation and will not have to support themselves for as long in retirement, thereby lifting their standard of living in retirement, albeit at the cost of having less retirement years,” she said.
“However, if they are unable to work or choose not to work and do not get any other form of income payment from the government, they would need around $60,000 more in superannuation or other retirement savings,” she added.
Written by Tim Stewart for the Investor Daily.
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