Lower paid workers, mostly women and young people, would be left tens of thousands of dollars worse off in retirement if they were to opt out of Australia's superannuation system, Industry Super Australia (ISA) has said.
According to News Corp reports, a pre-budget submission from an unnamed industry group has suggested allowing low-income earners to receive a cash payment instead of superannuation.
"This proposal is ill-conceived, irresponsible and risks mortgaging Australia's economic future," said ISA chair Peter Collins.
"Super builds a substantial nest egg for the vast majority of Australians through compound interest over decades of saving. This proposal would cost younger workers very dearly in the long run. The younger you start putting money into super, the more you retire with."
ISA said by middle age, the benefits are apparent. A 45 year old cleaner could be expected to boost their total retirement income by up to 30% a year if all of their super lump sum was converted into an income stream - a significant boost relative to the age pension alone.
For a middle income earner, the super system will deliver them a retirement income 46% above the full age pension. If they retire as part of a couple the respective figures are more than double this.
A single female earning $17,000 per annum and retiring in 2055 would enjoy a retirement income 27% higher than the full age pension, if she stayed in the existing superannuation system.
"Needless to say, the more people opting out of super, the higher the cost of funding the age pension would become a burden which would fall ever more heavily on taxpayers," said Collins.
"There are a number of sensible ways to make the super system deliver a fairer outcome for lower and middle income earners, primarily by rebalancing tax concessions which mostly flow to Australia's highest income earners. The government could also boost women's super by restoring the Low Income Super Contribution and lifting the freeze on the Super Guarantee from 9.5% to 12%.
"Australians need and deserve a safe pair of hands with retirement incomes policy. Endless, irresponsible kite flying causes confusion and erodes confidence in the system," finished Collins.