The report found a higher pension age would see most people retire with an income slightly higher than the amount they earned during their working lives.
The report found a higher pension age would see most people retire with an income slightly higher than the amount they earned during their working lives.

‘Increase wages not nest eggs’

MOST Australians would be better off if the Government dumped plans to increase superannuation and lifted the retirement age to 70.

The surprising findings are contained in a study of retirement incomes by the Grattan Institute, which warned employees would lose pay rises as super contributions increase to 12 per cent by 2025 when most full-time workers will already lead comfortable lives in retirement.

"Lifting the compulsory Super Guarantee would … reduce wages today and do little to boost the retirement incomes of many low-income workers," the report said.

"It would effectively compel most people to save for a higher living standard in retirement than they enjoy during their working lives."

The report found a higher pension age would see most people retire with an income slightly higher than the amount they earned during their working lives.

The federal Budget faces a $2 billion a year hit once super contributions start phasing in from 2021 because of lower tax rates on retirement savings, the report warns.

Tax receipts would be higher and employees would have greater spending power if the planned increases flow into pay packets instead of superannuation funds.

Twenty and $50 notes and gold and silver coins.
Twenty and $50 notes and gold and silver coins.

Pensions are likely to rise by less if super contributions rise because the payments are linked to wage rises, the report found.

"The people who should be campaigning against an increase to the superannuation guarantee are pensioners," Grattan chief John Daley said.

Using ABS and Treasury data, the report found Tony Abbott's plan to increase the pension age from 67 to 70 would make "more difference than almost any other policy change to economic growth and to budget outcomes."

But it called for a beefed up pension for people aged over 60 who struggle to find work after losing their jobs or because they work in tough manual roles.

The Government's controversial plan to increase the retirement age was abandoned by Scott Morrison in September after it failed to pass Parliament.

The report found a higher pension age would see most people retire with an income slightly higher than the amount they earned during their working lives.

Even at the current pension age of 67, most people are expected to retire with replacement incomes of 91 per cent of their working earnings.

Many low-income earners will get a pay rise when they retire because they will receive both the pension and access savings in super, according to the modelling.

But pensioners who do not own their own homes face a "significant" risk of poverty in retirement and the Government should boost rental allowance by 40 per cent, the report argued.

Mr Daley said the modelling showed most people would be better off in retirement than they thought and blamed a "financial services fear factory that churns out analysis claiming you won't have enough".