Prime Minister Malcolm Turnbull has attempted to dispel talks that the government is looking to freeze the superannuation guarantee (SG) rate …..
.. ….. indefinitely at 9.5 per cent in an attempt to boost the federal budget.
On Friday last week, The Australian reported that the federal government is preparing to “permanently halt” any further rises to the SG.
The newspaper reported that the halt to further increases to the SG would “recoup billions of dollars for the federal budget” and help fund income tax cuts in a reform package to be taken to the next election.
Later that day, Mr Turnbull said the government had “no plans to change the rise in compulsory super”.
“We are having a very lively debate about tax and economic reform, and so all sorts of proposals are swirling around and […] we are considering all of those things,” he said, speaking to reporters in Canberra.
The Association of Superannuation Funds of Australia (ASFA) said the SG is scheduled to increase from 9.5 per cent to 10 per cent in 2021, and then incrementally up to 12 per cent by 2025.
Keeping the SG rate at 9.5 per cent instead, ASFA said, would only reduce the retirement incomes of the majority of older Australians.
ASFA chief executive Pauline Vamos said that due to the ageing population, Australia will need to deal with a larger proportion of retirees and greater expenditure on health and aged care in the coming years.
“Future governments need to have the flexibility to ensure that the most vulnerable are adequately cared for and as many as possible are funding their retirement needs,” she said.
“The SG is a crucial pillar of the retirement incomes system, as it enables a significant proportion of Australians to predominantly self-fund their retirement, reducing reliance on the Age Pension. However, the system is still maturing and we have not yet seen the full scope of these benefits.”
According to estimates by ASFA, retaining the SG rate at 9.5 per cent would result in around 40 per cent of retirees relying on the full age pension by 2050.
“If we are looking to the system to supplement or replace the Age Pension, and to ensure that as many Australians as possible are able to achieve a comfortable retirement, then the scheduled increase in SG is a material factor in allowing the system to meet its goals,” said Ms Vamos.
Australian Institute of Superannuation Trustees chief Tom Garcia also agreed that “leaving the SG rate at 9.5 per cent will not deliver an adequate retirement income for many working Australians, with middle-income earners and women – who currently retire with about half the super of men – particularly vulnerable”.
Mr Garcia said any further delays to reaching 12 per cent by 2025 would create unnecessary uncertainty for workers and employers alike.
He also noted the widespread benefits of superannuation for the economy, including funding much-needed infrastructure development and reducing long-term pressure on the federal budget.
“Australia’s compulsory retirement savings system is the envy of other countries, who are now battling to support unfunded pensions, such as what we’ve seen occurring in Greece,” said Mr Garcia.
“Lifting the super rate to 12 per cent is about taking the right steps now for the long-term benefit of Australia.”
Written by Tim Stewart
Monday, 08 February 2016