Boost for Australia’s workers as super celebrates 30 years

Industry Super Australia

About 7 million Australians will benefit from a boost to their nest egg this month as the super guarantee rate increases to 10.5%, another step on the way to 12% super.

From July 1 an extra $312 a year will flow into the super accounts of the typical worker, and almost 300,000 lower-income workers, about 200,000 of whom are women, will be paid super on their wages for the first time with the removal of the $450 threshold.

July 1 also marks the 30th year of compulsory super, a landmark reform that has allowed millions of low to middle income Australians to save for an adequate retirement.

This year’s super boost may be small, but it will make a big difference to a worker’s nest egg – with a 30-year-old on the median wage expected to have an extra $22,000 at retirement.

The super rate is legislated to rise from 10% to 12% by 2025 by annual 0.5% increases. The bipartisan commitment to 12% super, will deliver an extra $78,000 for the typical 30-year-old worker’s retirement.

The biggest benefactors of the July 1 increase are women, the young and those on lower incomes, as:

  • More women than men get the increase – 3.55 million women compared to 3.47 million men.
  • Almost 55% of the extra super payments will go to those under 40 – and more people in their 20s will get a super boost than any other age bracket.
  • Two thirds of those benefitting from the increase earn less than $70,000 a year.

Now in its 30th year the Superannuation Guarantee is a critical response to the ageing population and improves retirement incomes of working people in a fiscally sustainable manner. It has allowed millions of low to middle income earners to save for retirement when otherwise they would not have.

Rewind to 1992 and only 10% of retirees had super as an income source, now super is most people’s second largest asset outside the family home.

On average today’s newly retired have an extra $150 a week to spend than 1992’s newly retired (in wage adjusted terms). The higher income has led to early retirees’ spending growing at a faster rate than any other age group, while the reliance on the aged pension is also lessening.

In 30 years super has grown to a $3.4 trillion savings pool that outstrips nominal GDP, is more than the market capitalisation of the ASX, has transformed Australians capital markets, and has turned around Australia’s current account.

Comments attributable to Industry Super Australia Chief Executive Bernie Dean:

Come July 1 the super guarantee will increase to 10.5%, another small step on its way up to 12% by 2025 that will make a huge difference when workers put their feet up at retirement.”

“Even though the staged increases are small, they’ll add up to so much more in savings and that means a more secure future for millions of Australians.”

“Thirty years of the superannuation guarantee is something to celebrate delivering millions of workers money they would never have dreamed of having.”

Table 1: Super Guarantee increase winners by state

State

People

Average increase per person

NSW

2,272,700

$327

Victoria

1,859,700

$308

Queensland

1,307,000

$292

Western Australia

782,600

$333

South Australia

485,500

$284

Tasmania

147,100

$267

ACT

88,700

$314

Northern Territory

71,500

$328

Australia

7,014,900

$312

Source: ISA analysis of 2018-19 2% tax file. Totals may not sum due to rounding.

Table 2: Super Guarantee increase winners by age

Age

People

% of SG increase recipients by age bracket

20-29

1,898,500

27%

30-39

1,878,500

27%

40-49

1,419,500

20%

50-59

1,157,300

16%

60-69

579,800

8%

70+

81,400

1%

All

7,014,900

100%

Source: ISA analysis of 2018-19 2% tax file. Totals may not sum due to rounding.

Key Facts:

The Super Guarantee rises from 10% to 10.5% today as compulsory super turns 30.

* A 30-year-old on the median wage will have $22,000 more at retirement.

* More women than men will get the increase – 3.55 million women compared to 3.47 million men.

* More people in their 20s will get the increase than any other age bracket

Two thirds of those benefitting from the increase earn less than $70,000 a year.

/Public Release. This material from the originating organization/author(s) may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).