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Australian net retirement benefits lag behind world's best pension systems
Australia's superannuation tax concessions are not generous when compared to the eight "best pension systems in the world", according to new research from Mercer.
Mercer found that despite the recent debate around Australian super fund members receiving unfair tax advantages, on the global stage it was untrue.
Dr David Knox, Mercer senior partner, said the after-tax benefits of Australians are lower than five of the other eight countries surveyed.
The research found the average British worker received 16.4 per cent, or $43, 534, higher net retirement benefits than the average Australian worker, while an American worker was 11 per cent better off.
Knox said that the treatment of superannuation was controversial, as the greatest benefits were received by those in the highest tax bracket. However the industry needed a holistic view that assessed the impact on the future cost of funding the age pension.
Mercer managing director and Pacific Market leader David Anderson said limiting tax concessions would discourage super contributions and diminish confidence in the system.
Mercer's research showed declining perceptions of super as a tax-effective retirement savings vehicle.
Anderson said 34 per cent of Australians believed super to be tax effective in 2008 compared to only 20 per cent in 2010, while one in five were unsure of the tax effectiveness.
Countries with the lowest net retirement benefit all had a tax on investment income which had a direct effect on retirees' final benefits and in many cases would increase their likelihood of age pension reliance, according to Anderson.
Australia had the lowest contributions caps of all nine countries surveyed. Anderson said it should be a priority for Government to increase caps for those aged over 45, rather than reducing super tax concessions.
"Higher superannuation benefits due to increased contributions, improved investment returns or lower taxation will lead to less pressure from the ageing population in future budgets," Anderson said.
The research, 'Tax & Superannuation: Benchmarking Australia against the world's best retirement savings systems', modelled the effect of different tax systems using the present value of the after-tax retirement benefit for an individual on average earnings with a 9 per cent employer contribution over 40 years.
It looked at the pension savings systems in Canada, Chile, Denmark, Netherlands, Sweden, Switzerland, United Kingdom and USA.
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