11 Jul Backbenchers protest against 12pc super guarantee
JOHN KEHOE AND JOANNA MATHER – AUSTRALIAN FINANCIAL REVIEW – 11 JULY 2019
Resistance is getting louder to the scheduled increase in the superannuation guarantee to 12 per cent, and backbenchers are hopeful the government’s planned retirement income review will provide an opportunity to nix the rise.
Tim Wilson, the Liberal chairman of the House Economics Committee, said the case for increasing the contribution rate to 12 per cent “has always been questionable compared to increasing wages now”.
He was responding to Grattan Institute analysis that lifting the rate would reduce lifetime incomes by $30,000 for middle-income workers.
This is in part because each dollar somebody has in super the less they are entitled to receive in government-funded pension payments, but also because because the pension is paid at a rate of 27.8 per cent of male total average weekly earnings. Lower wages therefore equals lower pension payments, even for present-day retirees.
“This latest data shows that the assumed benefits aren’t borne out unless you’re in the highest income brackets,” Mr Wilson said.
“An honest assessment of retirement incomes starts by recognising that ensuring workers get more cash now to pay down debt will provide a better and more flexible retirement later.
“Hopefully the retirement income review will take an evidence-based approach and fully consider the case for reassessing the claimed benefits of increasing the compulsory super contribution.”
The legislated rise in the SG from 9.5 per cent to 12 per cent between 2021 and 2025 has bipartisan support, and superannuation industry groups lashed the Grattan research.
“The Grattan Institute’s latest missive on retirement funding continues the pattern of selective and misleading modelling that seeks to undermine a retirement system that is globally acknowledged as one of the best in the world,” Association of Superannuation Funds of Australia chief executive Martin Fahy said.
He rebutted Grattan’s claim that increasing the SG to 12 per cent would not make much difference to retirees.
“The data actually shows the opposite. For a person on $60,000 a year – around the median wage – the increase in the SG will boost eventual retirement savings from $299,000 to $368,000.
“This will boost retirement income from $38,900 a year to $40,950 a year according to ASIC’s Moneysmart calculator, an increase of 5.3 per cent.”
Treasurer Josh Frydenberg said on Wednesday: “The government has no plans to change the legislated superannuation guarantee.”
The Productivity Commission’s report into the efficiency and competitiveness of superannuation last December recommended a broader retirement income system review before the SG rise, to probe the effect on national savings and distributional impacts on different income groups.
The review would primarily focus on the interaction of superannuation and government pension systems.
Liberal backbencher James Paterson expressed scepticism about forcing workers to divert more their pay to superannuation funds for retirement.
“I think the Grattan Institute research in this area is pretty compelling, particularly in a time of relatively low wages growth,” he told Sky News.
“If we are requiring employers to pay more superannuation, that’s less money to have to pay wages as the Ken Henry review into the tax system found.”