Australian Aged pension more effective in retirement than ‘failed’ super

Australian Aged pension more effective in retirement than ‘failed’ super, by Adam Creighton.

Superannuation has failed and should be slowly dismantled, allowing workers to spend up to $20,000 a year until they exhaust their accounts, according to a new analysis of the retirement system.

The analysis, by Sydney University economist Dr Cameron Murray, finds the age pension is over twenty times more efficient at delivering retirement incomes.

Dr Murray contrasted the super sector’s 55,000 workers and $36bn a year in fees with the less than 7,000 staff and $1bn in administration costs for the Age Pension which provides greater levels of annual retirement income.

“Scrapping the super system would massively improve Australia’s economic performance – it’s costly and inefficient, unnecessary, and incredibly unfair,” he said. …

“Instead of channelling incomes through asset markets, decreasing demand and soaking up a workforce the size of the military on an accounting exercise, the 28 million superannuation account holders could spend up to an additional $20,000 per year,” Dr Murray said. …

Last year superannuation funds paid out a little over $40.1bn in benefits to 1.4 million retirees, while age pension payments totalled $45bn to 2.5 million retirees, the analysis noted. For every $1m of benefits, super required 1.4 workers compared to 0.16 for the age pension.

1.4 annual bureaucratic wages, with on-costs, is probably approaching $200k. How grossly inefficient.

“Super does not fulfil the requirement of a retirement income system; it’s better thought of as a growth-sapping, resource-wasting, tax-advantaged asset purchase scheme for high income earners, that may ultimately have little effect on reducing reliance on the age pension system,” Dr Murray said. …

“Otherwise intelligent people have been convinced that taking poor people’s money, to make them even poorer, and giving it to expensive investment managers is a great solution,” he added.

Hear hear.