Federal Revenue and Financial Services Minister Kelly O'Dwyer has rebuffed the Labor Party's push to raise the superannuation guarantee (SG), pointing out several reasons why this is not the only answer to help boost retirement savings.
O'Dwyer told an industry conference that "mandating what people must put into their superannuation isn't the only way to increase retirement savings" and that it would be wrong to assume the SG will guarantee someone's present lifestyle once they reach retirement.
"Nor would it be right to think that the super-guarantee particularly benefits low income earners. Far from it," she said.
The SG rate is fixed at 9.5% until 1 July 2021, but is set to increase to 12% from 1 July 2025.
O'Dwyer said bumping up the SG from 9.5% to 12% calculates to about $10 billion of inflows into the industry in 2025-26, and alluded that this money is not always spent wisely for the benefit of members.
This leads to "a bonus of hundreds of millions of dollars in fees each year for the industry and ever increasing salaries for industry professionals," she said.
"And that is before you take into account all that additional money sloshing around for other cultural practices that have built up along the way.
"Members of superannuation funds have to stand by and watch as their retirement savings are spent on straight out political advertising."
The Henry Tax Review found employees bear the cost of SG contributions through lower wage growth - which only increases retirement income at the cost of reducing their current standard of living, she said.
O'Dwyer added this is something that should be top of mind in a historically low-wage growth environment. She also hit back at the super industry that's "often very quick to point out that the only way that people can achieve higher incomes in retirement is by compelling an ever increasing amount of wages to be sacrificed into superannuation."
A far better way to help Australians save for retirement is to give them the flexibility within the system to do so, she said.
It starts by making the system fair to women and small business owners for example; giving workers the right to choose which super fund should receive their hard-earned retirement savings; and by protecting members' money, she explained.
"Again, it is a mandated system so the government has a responsibility to ensure that fees and charges, including premiums for insurance products, are not inappropriately eroding retirement income," she said.
In its pre-budget submission, the Australian Institute of Superannuation Trustees (AIST) said waiting until 1 July 2025 for the SG to hit 12% represents a "major setback to a key long-term objective of superannuation."
Delays to the SG timetable will also create more fiscal pressure on future governments in relation to Age Pension funding. It recommends achieving a 12% rate in July 2022.