12% super guarantee by 2025 – small increases equal big benefits

The superannuation guarantee (SG) is the percentage of wages that employers pay into a super fund on behalf of most employees. It’s an important part of the superannuation system and adds up to support Australians financially in retirement over time. From 1 July 2022, the SG rate will be 10.5%.

Although it has yet to fully mature, Australia’s superannuation system is already considered to be among the best in the world1.

The first SG rate was 3% when introduced on 1 July 1992 and rose to 9% in the following 10 years. In the 19 years following until 30 June 2021, it only rose 0.5%. It was raised to 10% on 1 July 2021 and will rise to 10.5% on 1 July 2022.

12% by 2025

The government legislated a gradual increase in the SG rate with the first increase from 1 July 2021. From this date, the rate will increase slowly by half a percent each year until it reaches 12% SG in 2025. While such a small increase may not sound like much – over time, it could have a big impact on the retirement savings of Australians.

An increase in SG could mean people won’t have to work as long

Slowly increasing the SG to 12% by 2025 means people may not have to work as long to save the same amount for their retirement. Even small increases to the SG will make a big difference in the long run.

Taking a long-term view helps this generation and the next

Australians are living longer and not having as many children. The ratio of Australians working to those in retirement is expected to reduce into the future 2.

This means there’ll be fewer working people paying taxes to support things like the Government Age Pension, and more people likely to rely on part or all of the age pension in retirement.

The SG increase to 12% will is expected to help to take some of the pressure off the broader government budget and the overall economy over time.

Supporting the rise to 12%

AustralianSuper supports the increase of the SG to 12% by 2025 as legislated by the government. AustralianSuper believe it’s needed, affordable and necessary. It aims to positively impact the retirement outcomes of millions of Australians, particularly women and lower income workers, leading to a more comfortable and dignified lifestyle. These are key indicators of a good retirement outcome.

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