The 12% super increase will lift lifetime wealth for all Australians
The Retirement Income Review confirms Australia’s compulsory super system has lifted living standards for millions while easing the burden on the aged pension.
Industry Super Australia (ISA) welcomes findings that Australia’s sustainable and compulsory super system has allowed millions to save for their retirement.
With the super rate legislated to rise in seven months ISA will work with the government to use this report to improve the system efficiency, address entrenched inequality and ensure that members get even more out of every dollar they’ve been promised.
While the detail of the 600-page report is yet to be assessed, some of the findings on the legislated super guarantee increase the government selectively released overnight seem ill-founded.
The review states that super increases are at the expense of wages growth, claiming working life income would be 2% higher if the super rate does not lift, as legislated, from 9.5% to 12%.
In 2014 the Coalition government froze the SG promising workers compensating wage rises, an ISA analysis of more than 8000 EBAs struck then shows that promise went unfulfilled. There was no magic wage rise.
The reality is that the super rate has increased just 0.5% in the last 18 years, in that time real wages growth has been sluggish – many factors determines income growth.
It then suggests higher super could lead to an “unacceptable reduction” of living standards in working life due to lower wages.
Assuming the wage increases are passed on this time as claimed, and economic conditions would suggest that is unlikely, the panel seems to ignore the impact of higher taxes on wages and reduced social security and family benefits that gobble up workers take-home pay. There is a huge difference between income and what can be spent, lifting the super rate puts more money in workers pockets over their whole lifetime.
It is also unclear if the report has considered the millions of young Australians who have taken out more than $35 billion from their super, dramatically changing their retirement savings trajectory.
Concerningly the panel suggests that rather than lift the super rate retirees should instead just sell the family home, or reverse mortgage it to the hilt, to fund their golden years.
The SG increase will boost the average 30-year-old couple’s retirement balance by $200,000. For many that’s the difference between a dignified retirement and one just scrapping by.