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Workers are treating their retirement as an investment or “savings” for the future when they are intended to be used for a decent retirement, the government says.
Prime Minister Anthony Albanese wants a super “target” to become law next year and a Treasury discussion paper has given new insight into what that will mean for Australians.
Restricting access to retirement could prevent workers from accessing their retirement insurance to buy their first home, a policy favored by the Liberal Party.
“The government’s proposed superannuation target makes clear that the purpose of superannuation is to provide Australians with income for a decent retirement,” the Treasury document said.
Australians have been criticized for treating retirement as savings as Labor signals a major shake-up of retirement savings (file image pictured)
“However, Australians often perceive and characterize their retirement balance as ‘savings’ or an investment, rather than savings that can be used to generate retirement income.”
As part of Labor’s legislated target for super, Treasurer Jim Chalmers and his assistant minister Stephen Jones have flagged changing super so more Australians have access to annuities.
This is where someone receives regular payments each year from their retirement savings.
“The problem is that most pensioners do not have access to the right products to help them maximize their benefits throughout their lives,” ministers said on Monday.
The Treasury discussion paper noted that only 3.5 per cent of retirement products offer annuities or fixed sums paid to retirees each year.
The Treasury noted that Australians are living longer and will need to rely on their superannuation for longer.
A woman who retires at age 65 has a 45 percent chance of living to age 90, compared to 33 percent for a man.
“As a result of increasing life expectancy, more retirees need to rely on retirement income that is sustainable into their 80s and 90s,” the Treasury said.
“In fact, the likelihood is even higher, as improvements in health and medicine will further increase life expectancy during a person’s retirement.”
Housing affordability crisis
The Labor Party has devoted more energy to restricting access to superannuation, even as housing becomes increasingly unaffordable for young people.
New lending data showed demand for home mortgages continued to rise in October, with high immigration boosting housing demand.
Loan commitments for first-time homebuyers rose 5.1 percent in October. They were 6.8 per cent higher over the year, the Australian Bureau of Statistics revealed.
The average loan size for first-time home buyers rose 0.3 percent to a record $507,000. With a 20 per cent deposit, that would buy a $633,750 home.
This is less than half Sydney’s median home price of $1.397 million, meaning a first-home buyer could only afford one unit in Australia’s most expensive capital.
First-home buyers made up just under a third of the 32.6 per cent of borrowers, with many relying on financial help from their parents to get up the property ladder.
Restricting access to superannuation could prevent workers from accessing their superannuation insurance to buy their first home, a policy favored by the Liberal Party (pictured, a young woman in Bondi, Sydney).
Treasurer Jim Chalmers and his assistant minister Stephen Jones have now flagged the shift to super so that more Australians have access to products such as annuities where someone receives regular payments for life from their retirement savings.
super status
In October, Labor introduced a bill for the 0.5 per cent of Australians with $3 million or more in super to see their concessional tax rate for contributions double to 30 per cent, up from 15 per cent. , starting July 2025.
The government said this would only affect 80,000 people, but the Financial Services Council argued that Labor’s plan would harm 500,000 people as part of a plan to save $2 billion a year.
Australians have $3.5 trillion invested in super, but 27.6 per cent, or $964.5 billion, of that is in default MySuper products dominated by union-backed industry super funds, Authority data showed of Australian Prudential Regulation.
Since mandatory super employer debuted in 1992, only Coalition governments have relaxed the rules to allow early access.
The government of former Liberal Prime Minister Malcolm Turnbull introduced the First Home Super Saver Scheme in 2017, which allowed $15,000 to be withdrawn per financial year from super, but only from voluntary contributions.
A total of $50,000 can be withdrawn to finance a mortgage deposit on a first home.
During the 2020 pandemic, Scott Morrison’s government allowed $20,000 to be withdrawn in two $10,000 installments if they had been hurt financially by Covid lockdowns.