“Longevity risk:” Why you worry Canberra

It’s true.

People in Canberra are worried about you.

Particularly, at present, about your “longevity risk.”

They fear you might outlive your retirement savings.

So they are asking some pertinent questions.

“Do financial markets provide the means to address these risks?”

That one should have Australians, from Halls Creek to Hugenden, rolling around the floor in bitter laughter.

After all, our superannuation funds, which were meant to look after us, financially,  in our dotage, have been among the chief victims of the stock market crash, over the past 12 months.

“If not, is there a role for government to address these shortcomings?” the bureaucrats are asking, too.

These two, highly pertinent, questions both came from a discussion paper, published by the Henry review, that is charged with overhauling Australia’s highly complex tax and pension systems.

The committee’s third question, though, is the real killer.

“In what ways does (Australia’s) retirement income system impose undue complexity costs on retirees and workers,” it asks.

“How could this complexity be reduced?”

Great questions.

Australians will be looking for great answers, too, when this high powered committee makes its final report, by the end of this year.

The comittee notes that Australia has a three pillar retirement income system.

• The government Age pension.
• Compulsory savings, through the superannuation guarantee levy and
• Voluntary savings.

It says this system has developed “over time.”

“The SG pillar will not mature until 2037,” the committee says, in a preliminary paper.

That is when employees will be able to retire, with SG savings accumulated over a full 35 year working life, the committee adds.

What it doesn’t say is that, even then, those workers will be short changed.

Paul Keating, the architect of the superannuation guarantee system, meant contributions to go well beyond their present 9 per cent level.

But his successor, Malcolm Fraser, killed that idea, after he took office back in 1975.

So those warm, friendly bureaucrats do, indeed, have good reason to worry about you – and all other Australians – living too long.