Shortfall blow for retirees
THE average Australian will be $19,000 worse off by the slowing of the compulsory superannuation guarantee (SG) which will not come into full force until 2025.
Under the Coalition Government, the superannuation guarantee — the percentage rate of compulsory superannuation contributions made by employers to employees — was frozen at 9.5% in 2014 and will not rise again until 2021 when it begins incremental rises of 0.5%.
It is not due to reach 12% until 2025 — six years behind its original date of July 2019 set by the former Labor government.
The Association of Superannuation Funds of Australia’s chief executive officer Dr Martin Fahy said the slowdown of the rise to 12% could end up costing Australians significantly.
“We recognise the fiscal imperatives that have caused it to be pushed out — there have been real trade-offs and global conditions that have made it difficult in terms of commodity prices and competing public policy priorities,’’ he said.
“This is one where we can make a real difference to the public purse in the long term by moving from the current phase where 20% of people are self-funding, to a situation in 2035-2040 half the population are in a
position to be self-funding in retirement.”
ASFA figures show for a 40-year with a super balance of $80,000 on a salary of $70,000 a year, they would have a balance of $456,000 at the retirement age of 67. That is $19,000 less than had the scheduled superannuation guarantee rise to 12% started now.
For a 30 year old with a current super balance of $40,000 on a salary of $60,000 they would end up with $22,000 less with the delayed rollout of the SG, with a total of $515,000 in super once they stop working.
Tribeca Financial chief executive officer Ryan Watson labelled the delayed rolling out of SG contributions as “unacceptable” and “irresponsible.”
“It will leaving working Australians with a large superannuation balance shortfall when they retire,” he said.