Ditching 12% Super Guarantee will add more than $33 billion to Age Pension spending
A mooted plan by government to renege on the legislated increase in the super guarantee would add a whopping $33 billion to age pension costs over coming decades, modelling by actuarial firm Rice Warner reveals.
Plans to either ditch the increase or make the legislated increases opt-in would increase taxes and leave taxpayers on the hook for tens of billions in extra welfare spending.
As more people retire without the benefit of the legislated super boost, pension costs climb up billions each year – rising to an extra $33.3 billion (in today’s dollars) over the period to 2058. (See chart 1)
In addition, the projected $3.4 billion added to the Age Pension bill in 2058 will continue to grow significantly beyond that.
Australia’s ageing population means there are fewer taxpayers for every pensioner, making it likely future government would need to hike taxes to meet this bulging pension burden.
Ripping away the promised super increase leaves workers worse off, despite the increased pension costs. Today’s average earning 30-year-old couple would still lose $160,000 in retirement income, even after the taxpayer had been forced to tip in an extra $83,000 from the pension. (See tables 1 and 2)
Figures from the Government’s own Retirement Income Review reveal ditching the increase would leave all income groups with lower lifetime disposable incomes.
A plan to make the increases optional, forcing workers to pay for their own wage increase from their retirement savings, would also add $20,000 to the tax bill of an Australian couple on average earnings, because wages are taxed at a higher rate than super contributions.
But the increased pension costs surpass any additional tax revenue.
The government MPs advocating for this proposal, who all pocket more than 15% super, are determined to make Australians sacrifice their retirement savings for the government’s short-term Budget position – all while they give up nothing.
Those conspiring to cut workers’ super and add tens of billions to the pension want the Coalition party room to endorse a plan that delivers higher taxes and a larger social security bill.