If the Howard and Costello Government were worried about the impact of baby boomers on the cost of providing the age pension why did they substantially loosen the age pension means and assets tests in 2007?
If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people access their super at 55 when they cannot access the age pension until they are 65?
If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people take their super in the form of a lump sum, spend it all, and still be eligible for the age pension?
If the objective of the subsidies for superannuation is to reduce the cost of the age pension why can people who already hold more assets than the amount prescribed in the assets test continue to make concessional contributions?
If the objective of the subsidies for superannuation is to reduce the cost of the age pension why don’t the poorest third of the population, the third of the population most likely to rely solely on the age pension, receive any of the $45 billion contributions?
If the cost of providing tax concessions for superannuation are greater than the cost of providing the cost of providing the age pension how could substituting the former for the latter save the government money?
Whatever the rationales for the creation of the current system of tax concessions for superannuation, minimising the future cost of the age pension does not appear to be among them.
Do Superannuation tax concessions save the government money in the long run?
The belief that the tens of billions per year spent on taxpayer contributions to private retirement accounts ‘takes pressure off’ the commonwealth budget may be widespread but the source of this belief is not well documented.
The most comprehensive assessments of the Australian tax and transfer system in recent years was the 2009 Future Tax System Review conducted by the then Secretary of the Treasury, Dr Ken Henry. Figure 4, which is taken from Retirement Income Consultation Paper prepared for that review, shows that despite the incredible growth in the amount of assets expected to be invested in superannuation over the coming decades there is virtually no change expected in the number of ‘self-funded retirees’.
Figure 4 – Superannuation Assets and Age Pension recipients
Source: Treasury (2008) p. 33
A close examination of the trends in Figure 4 highlights how few people are expected to retire without further assistance from the Commonwealth government. Of most interest, however, is the sharp drop in the number of people receiving no age pension after 2007. This sudden drop was caused by the Howard Government’s decision to make the means and assets tests for the age pension significantly more generous. As discussed below, such a