An increase in the superannuation guarantee (SG) to 12 per cent would benefit the federal government as well as consumers, according to actuarial firm Rice Warner.
In a blog post on the Rice Warner website, the firm said: “At the current rate of 9.5 per cent, the SG will provide a dignified retirement for most people, warding off poverty (in conjunction with the age pension). However, it will not provide everyone with a reasonable replacement rate, nor a comfortable retirement.
“A higher SG improves the position for more people and has the advantage of also reducing long-term age pension costs.”
The organisation said a higher SG of 12 per cent would benefit the country by building its capital markets and pointed to an “infrastructure backlog and a technology deficit” within Australia as to why this benefit was significant.
It added that, by reducing the cost of the age pension, an increase in the SG would provide an opportunity for government expenditure to be diverted toward other areas of need, such as aged care.
Highlighting the additional benefit to individuals of achieving greater investment returns from professional management of their pooled savings as opposed to what they might earn through private savings, it stated a higher SG rate would ultimately increase the quality of life for the majority of retirees.
It also recognised the need for a “better metric” to analyse the cost of marginal changes to superannuation policy and accurately measure changes to the system, and noted the current metric’s tendency to understate the benefits of the system as a concern.
“The fact is that increasing the SG costs much less than we think, but delivers benefits to all Australians through strong real returns and enhanced retirement benefits and reduced reliance on social security systems,” it said.
Rice Warner’s comments were made in response to a claim by the Grattan Institute that any increase in the SG rate would reduce the wages of average workers by $30,000 over the course of their working life.
The claims were rejected by a number of industry groups which stated the modelling was inaccurate and did not consider a range of factors.