Reports that the Federal Government is considering scrapping increasing the superannuation guarantee (SG) to 12 per cent has caused deep consternation within the superannuation industry.
The reports, published in The Australian newspaper today, have suggested the scrapping of the rise in the SG in preference to lifting the goods and services tax (GST), however the superannuation industry has been united on the importance of lifting the SG to 12 per cent and the desirability of doing so in accordance with the original time-table outlined by the former Labor Government.
The Abbott Government slowed the Labor SG time-table, pushing backing the target date for reaching 12 per cent from 2021 to 2025.
Both the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC) today expressed concern at the media report.
ASFA chief executive, Pauline Vamos, said it was clear the Government was looking at all options to repair the Budget and ASFA understood its reasons for doing so.
“Our concerns centre on future retirees particularly women as it means the system will not reach its goals,” she said. “Not increasing the SG to 12 per cent will likely mean that in 2050, more than 40 per cent of retirees will be on the Age Pension instead of an estimated 20 per cent and the average replacement rate of pre-retirement income will be 55 per cent not 65 per cent.”
Vamos said Australia had an ageing population and it wass imperative that they were not only able to reduce their reliance on the age pension but to also fund the unexpected costs of unforseen health care needs as they got older.
The FSC, ASFA and the Australian Institute of Superannuation Trustees (AIST) have been united in the desirability of lifting the SG to relieve pressure on the age pension and health expenditures in future Budgets. They are also in favour of retaining the Low Income Superannuation Contribution (LISC).
FSC chief executive, Sally Loane, warned the Government against making future generations “bear the cost of short term Budget decisions”
“Stopping superannuation guarantee payments at 9.5 per cent would be inconsistent with Australia’s future needs for savings. It is simply too low to help the majority of Australians fund their retirement and would mean that more than 80 per cent of Australians would still be dependent on the age pension by 2050 — nearly 60 years after the introduction of compulsory superannuation,” she said.
AIST chief executive, Tom Garcia said leaving the Superannuation Guarantee rate at 9.5 per cent would 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.
He said any further delays to reaching 12 per cent by 2025 would create unnecessary uncertainty for workers and employers alike.
