Leaving SG rate at 9.5% condemns low-paid to poverty in retirement

A proposal to not increase the Super Guarantee rate condemns low-paid workers to poverty in retirement and women to relying on rental handouts, says the Association of Superannuation Funds of Australia (ASFA)

The Grattan Institute recently argued in a research paper that superannuation is not effective in providing retirement incomes for low-income workers. Instead of raising the Super Guarantee rate, the Institute called for lower superannuation tax concessions and boosting rental assistance for retirees.

ASFA said the paper was “replete with Victorian era proposals to fix the gender gap in Australian retirement income” and “adopted a fatalistic view of the future earnings of women and low paid workers and condemned them from an early age to poverty in retirement”.

“This is simply Grattan having another go at super, urging abandonment of legislated increases in the Superannuation Guarantee (SG) and ignoring the reality that lifting SG and in fact, doing it faster, is the real solution to improving women’s retirements,” said ASFA CEO Dr Martin Fahy.

“This paper adopts a set-and-forget view of class and income inequality. Proposals to fix the Budget by substantially cutting back on super entitlements and then giving a relatively few older, low income, retired women in rental accommodation less than $10 a week, are insulting and demeaning.”

“Instead, we should be lifting women’s long term prospects with more money in super. Dignity in retirement requires a decent retirement income.”

Dr Fahy said the proposal to boost rent assistance was affordable, at around $140 million a year, and should be considered on its own merits.

“The Age Pension and rent assistance alone cannot provide an adequate or acceptable retirement for Australians. The paper misses the reality of retirement living costs in Australia and the aspirations of the community to live comfortably, not just survive, in retirement.”

“Grattan’s goal is really all about saving Budget money in the short term. It ignores critical intergenerational challenges facing Australia.”

“Their solution to closing the gender gap is to make most people worse off in retirement by slashing tax concessions and to rip $4 billion from individuals.”

The Australian Institute of Superannuation Trustees (AIST) likewise says that leaving the SG rate at 9.5% would deny most Australians an adequate income in retirement and increase the cost of the Age Pension.

“Leaving the Superannuation Guarantee rate at 9.5 per cent will not deliver an adequate retirement income for working Australians, with many women particularly vulnerable,” said AIST CEO Eva Scheerlinck.

“A 12% SG rate not only addresses the challenges of Australians living longer in retirement, it also ensures ensure that future generations of taxpayers – the young people of today – are able to support a rapidly ageing population.”

The SG rate is set to reach 12% on 1 July 2025, several years later than was previously legislated, in what AIST terms a “significant delay”.

Ms Scheerlinck noted that the delayed increases to the SG rate under the Coalition government had not led to higher wages, particularly for low-income earners. Under the old timetable the SG rate for 2017/18 was 11.0%.

“Many low-income earners earn the minimum wage which is set by the Fair Work Commission Expert Panel. There is no evidence the employers of these individuals have lifted wages in response to delays in the SG timetable.”

Ms Scheerlinck agreed with the Grattan Institute that low-income earners, particularly women who didn’t own a home, had the highest risk of poverty in retirement, but said leaving the SG at present levels was not the solution.

“Women who have been low income earners throughout their working life and don’t own a home should not have to choose between housing security and an adequate income in retirement.”

“Australia’s compulsory retirement savings system is the envy of other countries, who are now battling to support unfunded pensions.”

“Lifting the super rate to 12 per cent is about taking the responsible steps now for the long-term benefit of Australia.”

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