Australia lacks a savings culture and our retirement incomes policy framework could be strengthened to encourage Australians to save for the longer term, the Financial Planning Association (FPA) has stated.

The FPA has made a number of recommendations in its pre-budget submission to the Federal Government, which would be supported by the Intergenerational Report released Monday 1 February 2010, including the need to increase the superannuation guarantee, improve policy to encourage savings and address issues of underinsurance.

“There are a number of areas the FPA has consistently tabled with government that could improve the current retirement system, and savings culture, and ensure that people can look forward to a comfortable retirement rather than an underfunded one,” FPA CEO Jo-Anne Bloch said.

“We have an ever-increasing and ageing population which will make more demands on the public purse. The Treasurer has concluded that we all need to start preparing for this sooner than later.

“One of the key topics in this debate is encouraging workforce participation. We applaud the $43m funding to support mature age participation, but we need to do more on the tax, social security and pension front to make it easier and more productive to work longer.

“A self-funded retirement is becoming more critical if Australians want to see their savings last an ever-increasing distance. This is necessary in addition to economic measures such as productivity gains.”

The FPA has made the following recommendations that could be immediately addressed in the 2010 - 11 Federal Budget but will also contribute to addressing longer term economic issues:

1. Strategies to empower consumers by encouraging a saving culture as early as possible;
2. Making upfront financial advice tax deductible to ensure financial advice is more affordable, and therefore accessible to enable more Australians to position their finances for the future;
3. Setting a strategy and timeframe to increase the current level of the Superannuation Guarantee which at 9% is insufficient, particularly for those with broken working patterns;
4. Addressing policy that currently creates barriers to people working through retirement to continue to build savings.

“Australians must start saving for the future now, rather than relying on the Government. Any safety net should be available for those in need,” Ms Bloch concluded.

The FPA pre-Budget submission is attached.