An overwhelming majority of Australians support lifting the superannuation guarantee to 12% despite Reserve Bank modelling revealing that doing so will shrink wages growth.
Three in four Australians say they support increasing the super guarantee to 12%, according to a nationwide survey conducted by the Association of Superannuation Funds of Australia (ASFA).
Only 12% of the 1,375 people surveyed said they think the super guarantee rate should remain unchanged at 9.5%.
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The superannuation guarantee is the minimum amount your employer has to take out of your earnings to contribute towards your super.
Currently, the rate is 9.5% of your base salary but is due to gradually increase to 12% by 2025.
|Period||General super guarantee (%)|
|July 1, 2002 - June 30, 2013||9|
|July 1, 2013 - June 30, 2014||9.25|
|July 1, 2014 - June 30, 2021||9.5|
|July 1, 2021 – June 30, 2022||10|
|July 1, 2022 – June 30, 2023||10.5|
|July 1, 2023 – June 30, 2024||11|
|July 1, 2024 – June 30, 2025||11.5|
|July 1, 2025 – June 30, 2026||12|
The superannuation guarantee is a means of forced retirement savings and is designed to take pressure off the Age Pension, which the government pays to retirees who don't have enough retirement savings to live off.
The survey found that 75% of Australians surveyed said they would struggle to live on the Age Pension alone, which is currently $24,551 per year for singles and $37,000 per year for couples.
ASFA CEO Martin Fahy said the findings of the survey show that most Australians agree that lifting the superannuation guarantee will be beneficial.
“Without question, Australians value their superannuation and they clearly support measures aimed at helping them to build the nest egg necessary to fund a dignified retirement in this country,” Mr Fahy said.
“Australia’s superannuation system enables Australians to retire with dignity. With the legislated increase of the Superannuation Guarantee to 12%, and as the superannuation system matures, we expect to see a greater proportion of retirees relying less on the Age Pension and more on their superannuation.”
By lifting the superannuation guarantee to 12%, ASFA predicts half of all Australian retirees will be self-funded by 2050, lifting the pressure of an ageing population on generations of future taxpayers.
But recent Reserve Bank modelling shows that lifting the superannuation guarantee to 12% will crush wages growth by 1.75%, according to an Australian Financial Review report.
The documents, which were released under Freedom of Information laws, show that lifting the superannuation guarantee to 10% by next July will strip 0.27% off wages growth by June 2022.
An increase in the superannuation guarantee to 12% will lead to wages being 1.75% less than they would have been without the increase.
In February, the Grattan Institute released a paper arguing that the 12% increase should be scrapped.
"Increasing compulsory super contributions to 12% would leave Australian workers with less money in their pockets now when they need it most, while giving them more in future when they need it less," the paper said.
"Increasing the Super Guarantee reduces wage growth, and thus reduces Age Pension indexation, which is linked to wages. Higher compulsory super would also hurt pensioners today by reducing their pension payments relative to where they otherwise would’ve been.
"Instead, the main beneficiaries from a higher Super Guarantee would be high-income workers, who receive a much larger tax concession than low-income workers and who will receive a relatively small share of their total income in retirement from Age Pension payments.
"In total, it’s likely that any increase in compulsory super is likely to be regressive: It provides a proportionally greater increase in the retirement incomes of high-income earners, who are ineligible for the Age Pension, than it will for low- and middle-income earners who will be subject to the Age Pension means tests in future."
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