Report sounds warning over super changes
INCREASING compulsory super contributions to 12 per cent will reduce wages and won’t boost the retirement incomes of many low-paid workers, a new report has found.
The analysis warns both sides of politics that raising the superannuation guarantee to 12 per cent would be “a policy mistake” and “cost the federal budget billions”.
The taxpayer-funded nonpartisan Grattan Institute has rejected the superannuation lobby’s argument that working Australians need more super to fund a reasonable retirement.
It predicts that low-income Australians who make compulsory super contributions for 40 years will retire on an income of well over 100 per cent of their working-life wage.
In 2014, the Abbott Government, which inherited a rate of 9.25 per cent, froze it at 9.5 per cent until July 1, 2021 and the 12 per cent rate until July 1, 2025.
Each 0.5 per cent increase is worth almost $2 billion a year in lost revenue to the budget.
Many low-income Australians get a pay rise when they retire, because the age pension and the income they get from compulsory retirement savings will be higher than the wage they received during their working life.
The research, from John Daly and Brendan Coates, shows that increasing the rate to 12 per cent will reduce age pension entitlements by about 2 per cent. The analysis found the main beneficiaries from a higher super guarantee will be high-income earners, who already reap benefits from generous super tax breaks.