The Association of Superannuation Funds of Australia (ASFA) has rejected the Grattan Institute’s calls to dump the bipartisan policy of lifting the superannuation guarantee (SG) to 12 per cent.
In response to the Grattan Institute’s statement that called for politicians to abandon plans to raise the SG rate from the current level of 9.5 per cent, ASFA chief executive Martin Fahy argued the institute’s ideological hostility towards super continued to cloud its judgment on retirement policy.
He added its “aversion” to self-funded retirement posed a danger to current and future retirees.
“This is just another contrived assault by Grattan on our world leading superannuation system,” Fahy said.
According to ASFA, for a person aged 30 on $40,000 a year, which is below median employment earnings, with a current balance of $20,000 the compulsory super system will deliver around $236,500 in retirement.
This will increase retirement income from $23,254 a year under the age pension to $33,670 a year, with ASFA arguing that, contrary to the Grattan Institute’s assertions, the super savings will only make a small dent on the age pension entitlement.
The Grattan Institute stated for each $1,000 of assets above the pension asset test threshold (currently $253,750 for a single homeowner and $456,750 for a single renter), a pensioner now loses $78 a year in pension payments.
It also cited internal research that showed increasing the SG rate to 12 per cent will make future pension payments 2 per cent lower.
Conversely ASFA projects once the 12 per cent SG rate is introduced 50 per cent of Australians will be living comfortably in retirement by 2050, just over double the current population.
Fahy also labelled Grattan’s assumptions as self-serving and said they failed to account for the additional capital available to retirees in the form of super savings which increase income levels and generate higher living standards.
He predicted Grattan’s stance would condemn retirees to be sicker, poorer and older for longer.
“Grattan selectively considers the interaction of superannuation and the age pension for a very narrow cohort to covertly justify the diminishment of superannuation,” Fahy said.
He added while the super reforms introduced in the 2016 federal budget made the super system more sustainable and equitable, the system should be left alone to give the industry the opportunity to consolidate and allow the changes to be implemented, and restore confidence in the system.
