Age pension to remain but doubts loom over super increase

Treasurer Josh Frydenberg has given the clearest sign yet that the government may freeze the currently legislated superannuation boost, but declared fears of the pension being phased out are “unfounded”.

In a speech made to the national press club on Friday, 26 February, Mr Frydenberg pointed to research in the Retirement Income Review, which showed that 9.5 per cent superannuation was enough to provide an adequate standard of living in retirement. 

“This is why, as the Prime Minister and I have said, we must rightfully and carefully consider the implications of the legislated increase to the superannuation guarantee before the 1st of July this year. This is even more important as we are in a time when our economy is recovering from the largest economic shock since the Great Depression,” Mr Frydenberg said. 

Mr Frydenberg said that if people used their assets efficiently, the current 9.5 per cent rate could achieve “adequate retirement incomes” when combined with the Age Pension.

The Treasurer also addressed fears that the pension system would be phased out by the time younger Australians reach retirement due to an ageing population.

“Clearly, we must do more to reassure all Australians that this concern is unfounded. The review’s findings could not be clearer. The Age Pension is well targeted and sustainable and will remain a key pillar of our system for generations to come,” the Treasurer said.

He also spoke of the trade-off between having an adequate lifestyle during a person’s working life and in retirement.

The RIR found that there is a trade-off between wages and superannuation, with a median earner approximately $32,000 worse off over the course of their working life. The Morrison government has, however, shied away from using the findings to freeze the increase.

Mr Frydenberg said he would “remain sceptical of those who, in the pursuit of their own interest, seek to restrict the legitimate choices Australians should have to save for their retirement”.

“It is simply not true, as some would have us believe, that there is not a limit to how high the superannuation guarantee can be increased in the name of delivering even higher retirement incomes,” Mr Frydenberg said.

“For some, there isn’t a problem that cannot be solved through higher rates of contribution to superannuation. These myths do not help Australians plan for retirement, or feel more confident and more secure in their retirement.” 

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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

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Co-authoring the popular investment book, Property vs Shares.