Associations representing the superannuation industry have railed against speculation the government is considering freezing scheduled increases to the super guarantee (SG).
The Association of Superannuation Funds of Australia (ASFA) said the move would not only reduce retirement incomes of the majority of older Australians, but also lead to increased government expenditure on the Age Pension in the near future.
Currently, the SG is scheduled to increase from 9.5% to 10% in 2021, and then incrementally up to 12% by 2025.
This increase is important in ensuring that the superannuation system enables retirees to maintain a "comfortable" standard of living throughout retirement, ASFA said.
"Future governments need to have the flexibility to ensure that the most vulnerable are adequately cared for and as many as possible are funding their retirement needs," ASFA chief executive Pauline Vamos said.
According to ASFA estimates, a retained SG of 9.5% would result in around 40% of retirees relying on the full Age Pension by 2050. The government expenditure on the Age Pension would consequently need to rise by approximately 25%. The proportion of Australians achieving a comfortable standard of living in retirement would also fall to around 40% of retirees (from 50% if current increases were maintained).
Industry Super Australia (ISA) said proposals to freeze compulsory super increases would cut a person's super balance at retirement by 20% and reduce national super savings by more than $900 billion by 2055.
ISA modelling also shows the government would need to pay 6% more in age pension outlays to make up for the shortfall in superannuation savings, which would increase pressure on taxpayers and the long term budget.
"It is hard to believe the government would seriously consider capping increases to universal, compulsory super, one of the major pillars in our retirement income system and our economy," said ISA chief executive David Whiteley.
"These proposals would reduce individual savings of millions of super fund members, reduce national savings and increase pension outlays. Speculation that such a measure would pay for income tax cuts is absurd. There would not be one dollar of savings in the budget forward estimates, and only a modest $500 million saving in 2021-22 which would deliver a tax cut of less than a dollar a week."
The Financial Services Council (FSC) said any plans to reduce the savings of middle Australia will increase long term pressure on the federal budget.
"Future generations should not bear the cost of short term budget decisions." FSC chief executive Sally Loane said.
"Stopping superannuation guarantee payments at 9.5% would be inconsistent with Australia's future needs for savings. It is simply too low to help the majority of Australians fund their retirement and would mean that more than 80% of Australians would still be dependent on the age pension by 2050 - nearly 60 years after the introduction of compulsory superannuation.
"We need to save more for our retirement, not less," Loane continued.
"We urge the government not to make short-term decisions but instead consider what is sensible public policy for the long-term benefit of the country."
The Australian Institute of Superannuation Trustees (AIST) said 9.5% just isn't enough for ordinary working Australians to retire on.
"It's widely acknowledged that you need 12% of your wages saved to enjoy a comfortable standard of living in retirement. Moving to 12% will be particularly beneficial - if not essential - for women who currently retire with about half the super of men," AIST chief executive Tom Garcia said.
"The timetable to 12% is gradual - we've known about it now for five years (it was formerly passed through parliament in 2012). Businesses have had time to adjust and the rises will be very gradual - typically coming out of wage rises, so most employees do not take a pay cut."
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