Thursday, August 02, 2012
Day Two at the FSC Annual Conference: a call for higher retirement age
As Reg the goldfish (@RegTheFSCMascot) headed for a quiet corner of the tank this morning (too many bubbles last night) John Brogden, Financial Services Council CEO, called for a higher preservation age.
With no magic policy wand to wave in order to make our national savings gap disappear, what are the practical opportunities available to us?
Increase the preservation age, argued Brogden, on the basis of Rice Warner research. And consider other reforms: putting GST back on the agenda (to be broadened or increased) and reform of state taxes - cited as the most distortionary in the Australian economy.
Tax reform decreases pressure on Government to use superannuation as a honey pot for funding, argued Brogden. Such reforms, such as the abolition of state taxes, promise direct and indirect benefits to the financial services industry, said the FSC chief.
Arguing that the economic power of superannuation will eclipse that of banking, Brogden called for economic reform that will support a stronger industry.
Marking his third year as FSC CEO he also referred to the industry's greater ability to influence the economy in which we invest - and the likelihood that superannuation as a sector will become more significant to the economy and individuals than banking.
The Johnson report featured in Brogden's remarks - increasing withholding tax creates sovereign risk he argued, and government must look to the Johnson review as a priority.
Brogden told assembled financial services industry delegates that Australian life expectancy has increased from 55 to well over 80, while the age pension age has only moved two years - from 65 to 67.
There is, as a result, a huge savings gap as people live longer.
So increasing the preservation age in Australia to 62 (from 60) would increase retirement savings by $400bn. Expect more policy development and research as the FSC mulls impact of increasing preservation age.
Cited as the single most effective way to address the longevity risk, Brogden advocated increased work place participation by older workers - ensure older workers stay in the workforce. And thus reduce longevity risk - the very real danger of outliving our retirement savings.