Using super for aged care would leave 350,000 without comfortable retirement: Industry Super
Using superannuation to pay for aged care could leave 350,000 young workers unable to retire comfortably, with the nation’s biggest super lobby group warning against tapping the $3 trillion sector in the upcoming federal budget.
Lobby group Industry Super Australia estimates about 4 per cent more people would be unable to retire with an income stream worth 65 per cent or more of their working life pay if increases to mandatory super payments are ring-fenced to fund aged care.
Industry Super is warning against any move to allow Australians to dip into their super to cover aged care costs.Credit:Glenn Hunt
Industry Super chief executive Bernie Dean said allowing people to take funds from super to pay for aged care would be “a tax by stealth” and would lower the quality of life of many in retirement.
Using superannuation to help fund aged care has not been formally proposed, but some Coalition MPs have suggested people should use contributions above 9.5 per cent to help fund aged care and health services.
Debate about the best use of superannuation savings has intensified over the past 12 months amid a push by Coalition backbenchers for the federal government to change its position on increases in the super guarantee from 9.5 per cent to 12 per cent by 2025. The first rise to 10 per cent is scheduled to continue as planned in July.
A tax on super earnings has also been proposed by the Australian Council of Social Service as a means of boosting aged care funding.
The federal government is expected to provide details of its multibillion dollar plan to help fund aged care in next week’s federal budget. Industry Super’s analysis relies on assumptions an extra $8.7 billion each year is needed to reach the standards of care outlined by the royal commission, with additional costs worth $15.5 billion a year by 2030 if the most extensive recommendations are adopted.
“It’s time the government re-commits to lifting the super rate to 12 per cent – no ifs, no buts and no maybes,” Mr Dean said.
A Treasury review of retirement incomes found a 9.5 per cent super guarantee could be adequate, but chairman of the review Mike Callaghan said ring-fencing super for aged care would be “inefficient”.
A separate report from the Australian National University found increasing public concern about people’s ability to retire with sufficient income and strong support for the legislated rise in the super guarantee to 12 per cent.
The study also found 47 per cent of people would withdraw their super for other purposes than retirement if they could access these savings early, including buying a home, reducing a mortgage or meeting living expenses.
More than half of working age Australians did not think they would have enough money to retire in future.
“Of those Australians who say they are worried about not having enough money in retirement in 2021, females, people who hadn’t finished year 12 and those living outside capital cities were most concerned,” co author Professor Nick Biddle said.
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