Young and low-income workers are the big winners in super boost
More than 6.7 million Australians will benefit from a boost to their nest egg from July as the super rate increases to 10%, with young workers and low to middle-income earners the big winners.
From July 1 an extra $233 a year will flow into the super accounts of the average worker.
This super boost may be small, but it will make a big difference at retirement – with a 30-year-old on the median wage expected to have an extra $19,000 at retirement, a couple will have an extra $38,000.
In total Australians will get an extra $1.5 billion paid in super in the next 12 months.
Half of the extra super payments – about $784 million will go to those under 40 – and more people in their 20s will get a super boost than any other age bracket (see tables below). The extra contributions will help young workers recoup the savings they lost after they were encouraged to raid their super to support themselves through the Coronavirus downturn.
Industry Super Australia analysis of tax file data shows that more women than men will receive the July 1 super boost – 3.41 million women compared with 3.36 million men.
Around 63 per cent of those who will benefit from the SG increase are on wages less than $70,000 – many of these 4.3 million workers are in line for a five-figure boost to their retirement savings – which will improve their quality of life at retirement dramatically.
The super rate is legislated to rise from 9.5% to 12% by 2025 by annual 0.5% increases. At the Budget this year the government re-committed to its election pledge to stick to the legislated schedule. This commitment to 12% super will deliver an extra $85,000 to the typical workers’ retirement savings.
The increase to 12% will also:
- · Add $170,000 to the retirement nest egg of the average 30-year-old couple;
- · Save $33 billion in Age Pension costs over coming decades;
- · Inoculate retirees from future adverse changes to the Age Pension;
- · Add $12 billion to Australia’s GDP, create 10,000 jobs and increase real wages, according to research from independent consultants ACIL Allen.
The Superannuation Guarantee is a critical response to the ageing population and improves retirement incomes of working people in a fiscally sustainable manner. Although still maturing, annual superannuation retirement benefit payments are already double age pension expenditures.