ASFA urges political support for higher superannuation guarantee

Amid the Government's eleventh hour efforts to gain support for its Mineral Resources Rent Tax, the Association of Superannuation Funds Australia (ASFA) urged parliamentarians to stop debating and support the increase in the Superannuation Guarantee (SG) on the basis of it being good for the economy, affordable, equitable and necessary.

ASFA chief executive, Pauline Vamos said the existing 9 per cent SG would not be sufficient to deliver dignity in retirement for the majority of Australians.

Pointing to the current economic uncertainty in Europe and the US, Vamos said, “The more people save today for tomorrow the more self-reliant they become in retirement”.

According to ASFA, increasing the superannuation guarantee to 12 per cent is affordable given the increase is to be phased in over eight years, and any foregone PAYE tax revenue will be offset by the increased revenue from taxation on super fund earnings.

As well, it argued the increase is equitable as the tax benefits for upper income earners are limited, given there is a cap on SG contributions and lower income earners will also soon receive the low-income tax rebate, further bolstering their superannuation and improving the equity of the system.

Based on the expenditure needs in ASFA's Retirement Standard, taking into account the Age Pension, a single retiree needs an account balance of about $430,000 in today's dollars to support a comfortable retirement, while a couple needs around $510,000.

Additionally, according to a report by Allen Consulting Group (commissioned by ASFA), an increase in the SG to 12 per cent would lead to a 0.33 per cent increase in (real) GDP by 2025, compared to the no-reform scenario.

"The Allen research provides strong support that a move from 9 to 12 per cent would be not only good for the retirement futures of current workers, but would also have no adverse affect on employers," Ms Vamos said.