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SG verdict: Choose your own adventure

In a catch 22, the final report says keeping SG at 9.5% will shrink Australian's final retirement balances by 12-18%, but increase working-life income by 2%.

Australians will retire with 12% to 18% thinner final balances if the government sticks with its plan to increase superannuation guarantee from current 9.5% to the planned 12%, the report says.

Its modelling found lower-income earners would be harder hit, with their balances at retirement projected to be 16-18% lower under a 12% SG regime (from the current 9.5%). Middle and high-income earners will see their balances shrink by 14-15%.

The report relies on five variables in predicting this 12-18% decrease: salary sacrificing, contributions tax, fees and insurance, compounding on investment returns, and interaction.

In simple terms, a median Aussie earner would have $45,000 less in dollar-contributions going into their retirement pool under the 9.5% rate than the 12% rate.

If investment returns on this are considered, it comes to $67,000 after compounding and interaction of the factors. However at the same time, he/she will also be more likely to make voluntary contributions, and pay lower taxes and fees.

"The degree to which the above factors offset the forgone superannuation contributions would vary by income level. They are estimated to offset almost two-thirds of the forgone SG payments for income earners in the 99th percentile, falling to about 20% for lower-income earners," the review concluded. The report's modeling is based on a 40-year career.

However, the report concludes that SG staying at 9.5% would mean that people keep more of their total remuneration as wages instead of SG contributions. It puts this at 2% higher working-life incomes, giving them "higher living standard in working life".

"If people efficiently use their assets, then with the SG rate remaining at 9.5%, most could achieve adequate retirement incomes when combined with the Age Pension....Maintaining the SG rate at 9.5% would improve the sustainability of the system," the report states.

The Michael Callaghan chaired panel which delivered the report was not tasked with making recommendations.

Treasurer Josh Frydenberg this morning did not announce an immediate pan to curb further SG rises but implied the government would take the report's findings into consideration.

Read more: Josh FrydenbergMichael CallaghanRetirement income review
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