The Morrison government is reportedly considering a proposal which would give workers the choice of an increase in super contributions or a pay rise.
The Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the opt-in proposal for the SG increase would undermine “the financial outcomes for Australians in retirement”.
“Consumer research has repeatedly shown that Australians strongly support our compulsory super system rather than one which is opt-in. There is a broad understanding that unless we are compelled to save a portion of our wages, very few of us will have enough money for a financially secure retirement,” Ms Scheerlinck said.
Ms Scheerlinck said lifting the super rate from 9.5 to 12 per cent amounted to workers on a typical median wage of $57,200 putting an extra $27.50 per week into super.
“This would happen gradually over a four-year period to 2025, with each 0.5 [of a percentage point] rise worth $5.50 a week,” she said.
“Many workers taking this as pay would have this amount eroded by additional income tax as well as losing out on the benefits of compounding interest on their savings.”
AIST estimates that over the course of an individual’s working life, an extra 2.5 per cent of super savings could boost an average couple’s retirement nest egg by $200,000.
“There are lots of ways to deal with low wage growth, but forcing people to use their retirement savings to fund their own pay rise shouldn’t be one of them,” Ms Scheerlinck said.
Industry Super Australia also opposes the proposal, with deputy chief executive Matthew Linden stating that an optional SG increase would be a recipe for higher taxes, lower lifetime incomes and a red tape nightmare for business.
“It would also be an administrative nightmare to manage an opt-out system — wrapping small business in yet another layer of red tape,” Mr Linden said.
“This underhanded plan to make super optional would force workers to pay themselves a wage increase by sacrificing their retirement savings — leaving the average 30-year-old couple up to $200,000 less at retirement.”
Industry Super Australia said any budget boost would be short-lived and would lead to a higher pension bill in the future.
“The government should follow through in the legislated increase to 12 per cent and not be exploring underhanded ways to renege on it,” Mr Linden said.
