Concern as Aussies back superannuation rate rise
Exclusive: Three in four Australians support the increase of compulsory superannuation payments to 12 per cent by 2025, new research has revealed.
The super increases are scheduled to climb from July 1 next year but there are fears since the pandemic hit it could burden business and stagnate wage growth.
A new independent report compiled on behalf of the Association of Superannuation Funds of Australia surveyed 1400 Australians aged 18 to 65 and found the following:
• 75 per cent say the superannuation guarantee (SG) rate should rise to 12 per cent by 2025.
• 52 per cent believe they will rely on a mix of super, savings and the age pension.
• 43 per cent are not confident they will have enough super and savings in retirement.
ASFA's chief executive officer Dr Martin Fahy said Australians overwhelmingly support the legislated super increase, which will climb from 9.5 to 10 per cent in July.
"Unequivocally Australians value their super and they want to go to 12 per cent because they fear that's pivotal to having a dignified retirement," he said.
"It's clear Australians want to be self-reliant and they see superannuation as a way to achieve that."
Dr Fahy said the cost to the employer to increase the SG would be less than a $1 a day per worker.
But Federal Treasurer Josh Frydenberg said there is "no change" to the government's policy on the superannuation guarantee.
"However the government understands the very real pressures facing Australian businesses and families due to the impact of COVID-19," he said.
Mr Frydenberg said many industry business groups and the Reserve Bank of Australia "have all found that a rise in the super guarantee will have a potentially detrimental effect on wages."
Reserve Bank governor Dr Philip Lowe earlier in August warned if the super increases go ahead they would "certainly have a negative effect on wages growth".
Australian Bureau of Statistics data showed in the 2019/20 financial year wages had their lowest growth in 22 years at just 1.8 per cent.
The nation's unemployment rate is 6.9 per cent and inflation is just 0.7 per cent.
Dr Fahy said the "likelihood of widespread pay increases to many people is very, very low".
Superannuation contributions are paid on top of an employee's wages.
According to ASFA's retirement standard, singles require $545,000 and couples $640,000 to live comfortably once they stop working.
This is on the proviso they own home outright, have good health and will receive a part pension.
Australian Industry Group chief executive Innes Willox said they support the increase of super to 12 per cent, however they have concerns about the timing and the priority needs to be jobs creation.
"The critical question now is not if the SG should be lifted but when the phased increase should begin," he said.
"We are acutely aware of the highly reputable research suggesting that lifting the SG from the middle of 2021 will stifle job creation and suppress wages growth.
"In view of this, close consideration should be given to delaying the phased increase in the SG until the recovery from the COVID-19 crisis is on a much surer footing.
AMP chief economist Shane Oliver said increases to the SG could mean "lower wages growth or a continuation of no wages growth for some".
"We used to see wages growth at about 4.5 per cent, but in recent years it's down around two per cent which would mean some people may be getting nothing or wage cuts," he said.
"There's an argument if a company looks at its total wage cost and has to increase their total labour costs, if they are mandated to increase superannuation then they have less over to increase wages."
The report also found 75 per cent of people say they would struggle to live comfortably on the age pension alone.
The age pension remains at the same fortnightly base rate of $860.60 for a single person or $22,375 a year.
For couples it's $1297.40 a fortnight or $33,732 a year, however during the pandemic the Federal Government has provided pensioners with additional financial support.
HOW MUCH EXTRA THE SG RISE TO 12% WILL GET YOU
Annual wage Starting super balance at 30 SG stays at 9.5% SG rises to 12% Difference
$60,000 $30,000 $380,000 $455,000 $75,000
$70,000 $30,000 $435,000 $520,000 $85,000
$80,000 $30,000 $485,000 $580,000 $95,000
$90,000 $30,000 $540,000 $645,000 $105,000
Source: ASFA, projected super balances in today's dollars.
DATE SG RATE
July 1, 2021 10%
July 1, 2022 10.5%
July 1, 2023 11%
July 1, 2024 11.5%
July 1, 2025 12%
Originally published as Concern as Aussies back superannuation rate rise