The only way to ensure Australian workers have dignity in retirement is for the Government to deliver on its promise to increase the super guarantee rate to 12 per cent, Industry Super Australia (ISA) says.
In its submission to the Retirement Income Review, ISA argues that with too many Australians, particularly women, retiring with not enough super, sticking with the legislated increase to 12 per cent is central to improving the adequacy of the system.
ISA analysis shows more than 8 million Australians could be worse off in retirement if the super rate is cut, losing more than $14.1 billion in super a year, or around $1,630 a year for the average person.
For an average 30-year-old couple working full time, detailed modelling shows cutting the super guarantee increase would deprive them of up to $200,000 in super by the time they retire.
Pressure on the pension would also be relieved, with independent analysis from Rice Warner showing a 12 per cent super rate will save taxpayers around $13.5 billion a year.
Australia’s super system is one of the best in the world, and is already helping millions of workers retire in dignity and ease the burden on the pension – but it is still maturing and there are inefficiencies and inequities that can be improved.
In addition to the need for a 12 per cent super rate, ISA’s submission also recommends:
· Super funds need to meet performance benchmarks or be removed from the system by APRA
· Expand workplace award coverage and strengthen the existing default system
· Lower the taper rate to $2 to remove a disincentive to save for middle-income Australians
· Examine tax concessions to ensure they are being targeted at those that need them the most
· Abolish the $450 threshold and pay super on paid parental leave
· Increase the Low-Income Superannuation Tax Offset (LISTO)
· No change beyond the legislated age pension age
· Make super payable on pay day
Further analysis by ISA also highlighted the hit to workers’ hip pockets if a recent proposal to make super optional for low income workers was endorsed. ISA found that an average worker would pay an extra $1,000 a year in personal income tax, meaning they are paying more now only to end up with nothing at retirement.
The foundations of our super system were that it was universal and compulsory. The Retirement Income Review, the first of its kind in three decades, presents a significant opportunity to build on those foundations but can’t be used as an excuse to tear them down. ISA’s submission can be viewed here.