Stalling SG at 10% would hit youngest hardest

Young Australian superannuation fund members stand to be 15% worse off at the time of their retirement at age 67 if the Government moves, as being speculated, to cap the superannuation guarantee (SG) at 10%.

Analysis undertaken by investment portfolio firm, mProjections has carried out analysis on what happens if the Government, in the May Budget, moves to delay or cancel the scheduled increases which would take the SG to 12% by 2025.

And the bottom line is that it is younger workers – those aged 25 or younger – who will be most affected with those aged 55 and over experiencing much less impact because they will have had less time in receipt of the scheduled increase.

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The mPortfolio analysis assumes a retirement age of 67, that people own their own home at retirement, that their fund is invested 65% in growth assets and 35% in defensive assets, and takes into account the age pension when appropriate.

It finds that those aged 25 stand to lose around 15%, while those aged 40 stand to lose 9.1% and those aged 55 stand lose 2.6%.

Source: mProjections




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As an industry can we please raise the level of this debate.
Its obvious that the more you put in over a longer period the more you will have in super.
However we need to discuss and debate the way super is actually skewed to people with more money.
Super is about funding a better retirement. It is NOT an end in itself; it is not about the funds management industry being able to clip a bigger and bigger ticket. Unfortunately it has become a vehicle to reduce tax for some.
Lets talk about that rather than "everyone" - except those who don't earn much, self employed, contractors, gig economy etc etc - having 12% put away for them.
There is some good stuff in the retirement incomes review - if you take time to read it, and if you ignore the vested interests.
If you don't accumulate lots of debt, and you pay off the mortgage when you go into retirement it is surprising how well someone can live on not as much as the wealth industry would have everyone believe. Just ask the parents of the baby boomers.

Thanks for writing the comment. Yes the debate needs more airing and we are please to contribute our bit. As you might guess, the modelling is not easy but this should not be a reason to hold back on the debate. It will get political very soon.

I tend to agree... the difference of 15% is, in reality around 2 years' earnings, and this could be easily recovered over a 42 year period simply by taking a slightly higher risk/return profile.

I have often considered that the loss of earnings Industry super funds carry on about over a longer term can always be overcome by good advice on wholesale funds and strategy benefits, including the lessons we can teach clients about risk and return over a longer period of time.

I'm not saying to invest them in a more uncomfortable risk profile, but knowledge is power...

In reality, the Industry fund advertising is not apples for apples anyway, because we all know the opaque nature of retail funds does not provide a real comparison to wholesale investments anyway. :P

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