Whether you will have enough money to retire in comfort is a major concern for many Australians, but a new report by the Grattan Institute suggests we might be worrying for nothing. The report argues that the current superannuation and age pension system will see most people have more than enough to retire on – in fact, so much so that they recommend not increasing the superannuation guarantee from 9.5% to 12%. Instead they argue it would be better to spend the money on rent assistance and reducing the means test taper for the aged pension.

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Clearly people are worried about their retirement. In the Grattan Institute’s latest report, “Money in retirement: more than enough” John Daley and Brendan Coates note that people’s belief that they will have enough money to retire has fallen sharply recently:

And yet they argue this is contrary to the reality.

Despite people’s concerns, most of us will have enough to retire on – more than 70% of the annual disposable income we had over the last 20 years of our working life, which is generally considered an adequate retirement level.

The fact is we generally do not need as much money in our retirement as while working or raising a family, and so a 70% replacement rate is considered a level at which we would be able to live in much the same standard of living.

The Grattan Institute forecasts that across all income ranges, households on average are able to reach that 70% level – in many cases well above:

These finding have been criticised by Industry Super Australia, which argues that they assume people are making more voluntary superannuation contributions than occurs, and that people work continuously from 30 to 67 year of age.

On the first point Coates notes that their model uses the most recent tax data and that “even if you assume no one makes voluntary super contributions then replacement rates for the median worker would fall from 91% of their pre-retirement earnings to just 88%”.

On the second point, Daley and Coates note that their model also assumes people do not work before 30 which in effect balances out the reality for people (especially women) who stop work in their 30s and 40s.

The Grattan Institute has long been a champion of other ways of improving retirement incomes than increasing the superannuation guarantee, mostly because they argue the benefits accrue to the wealthy and it is also very costly to the budget – and more so than making changes to the pension.

They calculate that increasing the superannuation guarantee to 12% will actually see almost no net benefit to those on less than median household incomes because of associated reductions in the age pension, while those in the 90th income percentile would see their retirement income increase by nearly 5%:

And because of the cost of tax breaks associated with superannuation they argue the cost to the budget is vastly outweighed by the reduction in the age pension spending overall:

The report shows that in terms of government assistance, the wealthy clearly do much better out of tax breaks to their superannuation than do low income earners from the aged pension:

But while the current system, expensive though it is, does seem to be at least producing a good level of retirement incomes, there are major issues on the way, due mainly to lower home ownership.

Daley and Coates found that housing costs for renters significantly outweighs that of home owners as people approach retirement age, because people generally have paid off their home by that stage:

And as a result the level of financial stress is much higher for retirees who are renting than home owners. But crucially they find that financial stress for retirees regardless of whether they rent or own their home is much less than for those of working age:

But with home ownership levels falling this divergence between owners and renters is going to become exacerbated. In 1996, nearly half of all 45-54 years old (ie those who are now just retired) owned their home outright; now that figure is just 17%:

That suggests a wave of retirement problems coming down the track. The report found that those in their 40s who are renters will have a much lower retirement income compared to home owners across all levels of income:

This is why the authors argue that increasing rent assistance by 40% would deliver much greater benefits for low income households than would increasing the superannuation guarantee.

They also argue that median income households would be better off if the government loosened the taper of the aged pension means test. Currently the age pension is withdrawn at a rate of $3 per fortnight for each $1,000 of assets above the “asset free” area; they argue this should be reduced to $2.25 in order to encourage people saving for retirement.

They argue this new taper would on average see median household retirement income increase by 4.5% whereas increasing the superannuation guarantee will actually see a slight drop.

And while increasing the guarantee would cost the budget $2bn in 2019-120, the change in the means test taper would cost just $0.75bn – much better bang for the government’s buck:

Less controversially the report also argues that were superannuation fees reduced and returns increased by 0.5% a year, the median household would be 3.8% better off. This finding very much concurs with that of the recent inquiry by the productivity commission into superannuation.

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Rather more controversially, the report recommends the government reinstate its policy of increasing the retirement age to 70, but it notes as well that the government should investigate “whether there should be a new regime for easier access to the pension for people aged over 60 years whose health has been so impaired that it is difficult to work”.

While the findings of this report certainly are challenged by the superannuation industry, it makes a valuable contribution to the political debate which has become somewhat stuck in a “superannuation will fix everything” mode.

There is more than one way to achieve a retirement income. This latest report is valuable if only for providing a very strong rebuke to the sense that superannuation is costless to the government – indeed given the level of tax breaks, age pensioners are arguably less of a burden to taxpayers, and the benefits are certainly not distributed to those who most need them.

• Greg Jericho is a Guardian Australia columnist