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Age pension spending to rise: ISA

Industry Super Australia (ISA) said ditching the 12% superannuation guarantee could add over $33 billion to Age Pension spending.

ISA said modelling from Rice Warner suggested the Age Pension would have to make up for the superannuation guarantee not increasing.

"Plans to either ditch the increase or make the legislated increases opt-in would increase taxes and leave taxpayers on the hook for tens of billions in extra welfare spending," ISA said.

"As more people retire without the benefit of the legislated super boost, pension costs climb up billions each year - rising to an extra $33.3 billion (in today's dollars) over the period to 2058."

ISA added that Australia's ageing population means there will be fewer taxpayers for every pensioner.

It said this could lead to future governments needing to hike taxes to meet the potential bulging pension burden.

"Figures from the government's own Retirement Income Review reveal ditching the increase would leave all income groups with lower lifetime disposable incomes," it said.

"A plan to make the increases optional, forcing workers to pay for their own wage increase from their retirement savings, would also add $20,000 to the tax bill of an Australian couple on average earnings, because wages are taxed at a higher rate than super contributions."

Industry Super Australia deputy chief Matthew Linden said dumping the legislated increase in the SG will leave Australians with less private savings at retirement and more reliant on the publicly funded age pension."

"There is no free lunch, for every dollar taken out of super early the taxpayer has to pay back even more in higher pension costs - that's why if the government opts-out of super it opts-in to higher taxes," Linden said.

"This short-sighted policy will leave workers tens of thousands worse off and a huge pension bill that we will have to pay through higher taxes."

Read more: ISAAge PensionIndustry Super AustraliaMatthew LindenRetirement Income ReviewRice WarnerSG
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