Superannuation tax concessions are perversely skewed in favour of high-income earners and should be scrapped, with a universal non-means-tested age pension created instead, a think tank says.
David Ingles from The Australia Institute said superannuation tax concessions would soon cost more than the age pension, and with an ageing population Australia's dual pension and superannuation system was only going to become more expensive.
"Age pension spending is rising at about 7 per cent per annum, but tax concessions are rising much faster at about 11 per cent per annum," Dr Ingles said.
"The problem is that although the age pension is directed to low-income earners in particular, tax concessions disproportionately benefit high-income earners, and very markedly so. It's quite perverse how much they benefit high-income earners."
Dr Ingles spoke in favour of a universal age pension at the Australian National University on Wednesday, at a forum presented by the ACT division of the Australian Association of Gerontology. Dr Ingles co-authored a report on the issue with Richard Denniss.
Their proposal is similar to the approach in New Zealand, where labour force participation is much higher than in Australia.
"Maybe we could redirect the total spending on superannuation tax concessions into the age pension," Dr Ingles said. "We could afford to totally abolish the means test and most people would gain as much in means test abolition as they would lose in terms of the loss of tax concession, and, in fact, gain more, so that 80 per cent of the population would benefit from the change.
"The only people who are net losers are people on a salary of $100,000 or $150,000 ... but the policy as a whole would be very redistributive and it would result in much greater retirement income adequacy and it would resolve the problems with poverty among the aged population."
Dr Ingles estimated singles and couples' pensions would rise under a universal age pension scheme, and if phased in over 20 years there could be a net budget benefit of $240 billion.
"The reason we could actually get money from this change is because we would not immediately increase the age pension and abolish the means test," he said. "We would do it in stages, because otherwise we would advantage people who've saved under concessional conditions."
Dr Ingles also believes a universal non-means-tested age pension would be more sustainable than the current system.
But he admits it would be a very radical change.
"And there are problems about horizontal equity between people who are aged and people who are on the welfare system ... like people on disability pension, on sole parent pension, on Newstart Allowance, and to increase the age pension by 25 per cent obviously raises questions of horizontal equity," he said. "Another alternative is to abolish the super tax concessions and use that money for two purposes.
"One would be to reform the tax system as a whole, so you have a big base-broadening exercise where you can reduce marginal tax rates or you can get rid of inefficient and costly taxes, like some of the state taxes that the Henry report wanted to abolish. Or you could reduce the taper rate in the pension means test, so pensioners are not subject to such high effective marginal tax rates.
"Or you could increase some of the payments which are high priority in terms of poverty alleviation, such as rent assistance. You could do all three things, there's enough money to do all that because there's so much money sloshing around on the tax concession side."