The Super Guarantee rate should be increased to 12% “as soon as possible”, says the Association of Superannuation Funds of Australia (ASFA) shortly before the Federal Budget.
The Super Guarantee rate, which currently stands at 9.5%, is set to increase to 10% from 1 July 2021 and reach 12% from 1 July 2025.
The Coalition passed legislation slowing the increases, otherwise the SG rate would currently be 11%. There has been speculation that the Government would further slow increases in the Super Guarantee rate.
However Treasurer Josh Frydenberg has said there are no plans to change the SG rate reached 12% in 2025. Though he did not explicitly commit to the current timetable. Labor has said it won’t accept any further delays to increases in the SG rate, though without committing to their own timetable.
But ASFA is calling for the SG rate to increase faster, with ASFA CEO Dr Martin Fahy saying: “Should the upcoming Budget demonstrate an early pathway to surplus, this provides an opportunity to accelerate the move to 12 per cent sooner, rather than later. Each year we delay is costing Australians superannuation savings that could help improve their retirement outcomes.”
ASFA calculates that bringing forward the SG timetable by two years would boost the retirement savings of someone aged 30 today by $7,000 by the time they were 67.
Whereas, if the SG rate was left at 9.5% this would cost the same person $71,600 in superannuation by the time they reached retirement. This assumes they were earning $70,000 a year and had $50,000 in super currently. With a 12% SG rate it is estimated they would have $568,600 by retirement – above the ASFA ‘comfortable’ Retirement Standard – compared to $497,000 with a 9.5% rate.
Dr Fahy said increasing the SG rate to 12% was “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.”