Co-contributions could boost savings levels
RESEARCH into super co-contributions, outlined by Dr Vince FitzGerald of the Allen Consulting Group at the Investment and Financial Services Association (IFSA) conference, indicates that the Government could get a large increase in new voluntary retirement savings for little additional cost than that flagged in the 2002 Federal Budget.
The research, which involved 1,069 phone interviews, examined attitudes towards the recently announced co-contribution scheme, where the Government will match dollar for dollar the voluntary super contributions of people earning below $20,000 a year, to a maximum of $1,000.
Almost half the respondents said they would definitely make an additional contribution to their super in the next 12 months if the co-contribution plan went ahead at the 1:1 matching level.
Interestingly, however, the researchers found that people would also respond to a one dollar for two dollar matching scheme almost as strongly as to the proposed dollar for dollar scheme. One in three people said they would participate in a 1:2 scheme, which was 33 per cent more than those planning to make a voluntary contribution in the absence of any scheme.
The Government estimates its co-contribution scheme could cost between $85 and 95 million a year for the first three years. But Fitzgerald says if a 1:2 scheme was extended to those with an annual income of $30,000, this would only cost $102 million a year but generate $251 million in extra contributions. Extending the scheme to those earning $40,000 a year would cost $158 million and bring in additional contributions of $371 million a year.
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