Opposition Leader Bill Shorten says Treasurer Scott Morrison should focus on winding back generous superannuation tax breaks for millionaires if he is serious about fixing loopholes in the retirement system.

Labor has already revealed its superannuation election policy which focuses on limiting tax breaks to millionaire retirees, while Mr Morrison indicated a crackdown on the overuse of concessions in the accumulation phase was on the government's agenda.

The superannuation industry agrees loopholes in the tax system have been rorted for wealth creation, but worries the system would become too inflexible if transition to retirement arrangements were scrapped altogether.

Mr Morrison confirmed in The Australian Financial Review on Thursday he would be "looking at arrangements that may present integrity threats to revenue". 

Mr Morrison also expressed concerns about super's tax treatment being used for wealth creation or estate planning purposes, something the Association of Superannuation Funds of Australia has long condemned. 

Mr Shorten refused to say whether or not he agreed with the proposition to change loopholes such as transition to retirement pensions.

But he said retirees need longer term thinking, not "thought bubbles".

Mr Shorten said there had been a witch-hunt by the Coalition against Labor's proposed changes to superannuation.

"Now he's in charge of the budget he (Mr Morrison) realises he's got a problem," he said.

'High-income rort'

Australian Institute of Superannuation Trustees chief executive Tom Garcia said that when super contribution caps were $100,000 the ability to transition to retirement was "a complete rort for high-income earners", but said the system had improved since caps were reduced. 

"Transition to retirement was set to up to allow people to move into part-time work and supplement their incomes with their super but has rarely been used as it was intended," he said. 

"There is a strong argument that transition to retirement strategies should be limited to those aged 60 and over."

While ASFA welcomed efforts to limit the use of super for purposes beyond retirement income, it was concerned about the moves impinging on the flexibility of the system as it stood. 

"The policy driver behind the transition to retirement pension arrangement is to provide older Australians with the flexibility to reduce their hours while using a superannuation account-based pension to supplement their reduced employment income.

"It is still very important to have flexibility in the system as many people still need to build account balances but still need to work," ASFA chief executive Pauline Vamos said.   

Work encouraged

"One of the most important things we can do to reduce the impact of an ageing population, is to encourage older workers to stay in the labour market and transition to retirement provisions can facilitate this," she added. 

Financial planner Liam Shorte, of Verante Financial Planning, said he was concerned any move away from transition to retirement would reduce interest in the superannuation system. 

"This is especially important when you consider [that] after the GFC, faith in the system took a huge hit," he said. 

Transition to retirement strategies allow pre-retirees to enter the tax-free pension phase early while continuing to work, which Mr Shorte said significantly boosted their retirement savings and reduced pressure on the public purse. 

He said women in their 50s in particular, who had spent extended periods outside the workforce, could benefit from the pensions.

"It may at first appear to be a loophole but in truth, the system needs something like this to boost engagement with superannuation and retirement planning or in the end, the system will have to support more people through age pension support," he said.

"The reason the strategy engages people is that it does not involve investment risk."

Dr Adrian Raftery, a tax expert at Deakin University, said a 60-year-old earning $120,000 with $500,000 in super could gain $8900 a year from the strategy, if they salary sacrificed and started a transition to retirement with $20,000.

Original article published in the Australian Financial Review on October 29, 2015