Hands off ... Retirees shouldn’t worry about losing their age pension — experts says Australia’s system is sustainable. Picture: Supplied Source: Supplied

A new report by The Actuaries Institute and Rice Warner forecasts that the retirement incomes of more than half of today’s 30-year-olds will comprise at least one-third age pension payments.

It says many wealthier retirees will continue to receive some pension, but warns that Middle Australia is at risk of getting squeezed.

Younger Australians who worry about the pension disappearing decades from now shouldn’t lose sleep. Actuaries Institute CEO David Bell said it would remain a “very significant proportion” of people’s retirement incomes in the future.

“Eighty-five per cent of people over 65 today are on a full or part pension — that’s only likely to be down to about 75 per cent in 30 or 40 years,” he said.

The institute’s For Richer, For Poorer report says super will fund a bigger proportion of future retirement incomes, but the reduced cost to the government will be offset by a greater number of retirees who will live for longer.

Safety net ... Chief Executive of ASFA, Pauline Vamos said the age pension was sustainable. Picture: Sam Mooy Source: News Limited

“While the super system is working well generally, it will not deliver comfortable retirements for all groups,” Mr Bell said, singling out single women as those likely to experience the lowest incomes.

“We think there’s a risk that the Middle Australia of the future will have to pay higher taxes to fund current and future retirees — which in turn reduces their capacity to pay for their own retirement, and it’s likely that the growth in property values experienced by current retirees won’t apply to them.”

Association of Superannuation Funds of Australia CEO Pauline Vamos said the age pension was sustainable.

“Australia’s cost of delivering the age pension is less than 4 per cent of GDP. When you look at other western countries, their pension costs are up to double-digit figures,” she said.

“There will be a safety net for the most vulnerable — how thick that safety net is and whether it covers all health care costs is another issue.”

Ms Vamos said it was “still early days” for Australia’s superannuation system, which was just 22 years old. “It hasn’t been able to do its job yet,” she said.

Tax reform ... Chief Executive of CEDA, Professor Stephen Martin, says taxation arrangements need review. Picture: Supplied Source: News Corp Australia

Meanwhile, a CEDA retirement report released yesterday has reignited the debate about letting first homebuyers use their super as their deposit.

Its suggestion was welcomed by mortgage providers but opposed by the super industry, which said it would negatively impact the retirement savings of young people who typically had low super balances anyway.

The report outlined other radical reforms including removing all super tax concessions and including the family home in age pension means testing.

CEDA chief executive Stephen Martin said all options should be considered.

“Obviously, taxation arrangements need review because currently concessions are benefiting the rich and are being used as tax mitigation measures rather than to encourage retirement savings,” he said.

Report co-author and economics professor Rodney Maddock said super tax concessions could be abolished so super would be paid for with after-tax dollars, just like housing.

“In the US you get a tax deduction for your mortgage, but it seems to us far more sensible to move in the other direction,” he said. “Superannuation is not the only form of savings for retirement.”

@keanemoney