The superannuation guarantee (SG) should begin moving towards 12 per cent before 2021 if the upcoming federal budget points towards a surplus, according to the Association of Superannuation Funds of Australia (ASFA).
The superannuation industry peak body called for the change to take place ahead of the planned increase in two years to ensure retirement incomes were adequate and to reduce the amount of retirees partly or completely reliant on the age pension.
ASFA chief executive Dr Martin Fahy said any indication the upcoming budget demonstrated an early pathway to surplus was an opportunity to accelerate the move to lift the SG to 12 per cent, and each year that move was delayed reduced the level of superannuation savings that could improve retirement outcomes.
According to ASFA modelling, an average income earner aged 30 today and on a $70,000 salary would have $71,600 less when retiring at 67 if the SG stays at 9.5 per cent, however, bringing forward the SG increase by two years would boost their retirement savings by an additional $7000.
“The super guarantee is scheduled to increase to 12 per cent from 2021, concluding in 2025. This is crucial to ensure more Australians achieve an adequate standard of living in retirement above the age pension. For all income earners, even those very close to retirement, moving to 12 per cent will mean a more comfortable standard of living in retirement,” Fahy said.
ASFA made the call for the change in the SG rate in a ‘proposed toolkit’ for the government that outlines the impact of any further delays in reaching a 12 per cent rate.
“Currently, on the basis that the scheduled increases in the SG to an eventual rate of 12 per cent will occur, the proportion of the population aged over 65 receiving a full or part age pension will fall from the current 70 per cent to 60 per cent by 2055, with 60 per cent of those receiving the age pension or the full age pension falling to 40 per cent over the same time period,” the toolkit stated.
“Not going to 12 per cent would mean that the reduction in the proportion on the age pension would be not be as great, perhaps only to 65 per cent or so. As well, the proportion on the full age pension would be higher than 40 per cent in 2055.”
Other measures put forward in the toolkit for consideration by the government included stabilising the tax settings for superannuation over the course of the next parliament, boosting the super balances of women and low-income earners, and facilitating investment in affordable housing by superannuation funds.
