The Association of Superannuation Funds of Australia (ASFA) appears to have abandoned the notion of ‘soft compulsion’, arguing that voluntary savings beyond the superannuation guarantee (SG) will not succeed in delivering Australians a comfortable retirement.
In a report issued this week, ASFA concludes that compulsorily lifting the SG to 12 per cent is necessary because “the available evidence suggests” voluntary contributions will not achieve the desired outcomes.
ASFA policy had previously argued for “soft compulsion” as a means of dealing with Australia’s retirement incomes shortfall.
“Despite significant tax incentives for marking voluntary superannuation contributions, only around 20 per cent of employees do this,” the report said. “As well, the incidence of making salary sacrifice contributions only really begins to pick up after age 45.”
“Compulsory superannuation contributions are both needed and wanted. Leaving decisions about the level and timing of contributions to individuals would mean the great bulk of Australians would not make additional contributions,” it said.
The ASFA report suggested that for the minority of Australians that did make additional contributions, these would generally be made later in life when the impact on final retirement savings would be less.
In pointing to the report findings, ASFA chief executive, Pauline Vamos (pictured) said it confirmed that Australians would be better served by a lift in the compulsory SG than under the recommendations of the Henry Tax Review.
Indeed, the ASFA report analysis of the Henry Review pointed out that its recommendations were based on interactions with a proposed personal income tax system that was substantially different to the current one and which the Government had ruled out adopting.
As well, it said the Henry recommendations with respect to superannuation would result in substantial ongoing costs to tax revenue, individuals having to pay tax out of what was previously take-home pay, and administration complexity.
