Australian planners say compulsory super doesn't workn

The Financial Planning Association of Australia is calling on the government to develop a long term retirement incomes policy, because the current compulsory savings regime doesn't work.

Friday, November 12th 1999, 12:00AM

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The Financial Planning Association of Australia is calling on the government to develop a long term retirement incomes policy, because the current compulsory savings regime doesn't work.

It says a comprehensive review is required to address all the relevant issues, including pensions and related social security issues, superannuation, financial planning, health and aged care.

The FPA says Australia's household savings rate has fallen from around 15 per cent of GDP in the 1970s to 4.7 per cent in the 1996/97 year, and it is expected to be less than 3 per cent in the current financial year.

It says Australia now has the third lowest savings rate as a percentage of GDP of all OECD countries.

The association wants the government to put in place policies which will encourage people into long-term savings. On its wish list is:

A change in the taxation system to EET, that is contributions and earnings would be tax exempt, however the final payment would attract tax at the savers full marginal rate.
To maintain pre-retirement lifestyle the FPA estimate people should require an income of between 60 per cent and 70 per cent of pre-retirement net salary. It says super contributions of 15 per cent to 18 per cent are needed over 35 years to achieve this goal.
The FPA says superannuation should be limited to the provision of an income stream or a minimum indexed pension at aged pension level before a lump sum can be taken.
The FPA strongly recommends medium term savings are needed for major capital purchases on retirement.

The FPA is also concerned about the impact rising health care costs will have on the Government's ability to pay a pension.

Meanwhile, a group of retirement income experts reckon the scheme proposed by the Labour Party in this election is fundamentally flawed. For more on this visit supertalk.co.nz

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