Total superannuation contributions are down over the past twelve months, likely due to uncertainty around policy settings and slow wages growth, according to the FSC/USB State of the Industry report 2017.
The report says that total contributions over the past twelve months are down 1.1% from previous levels, with employer contributions up 0.3% but failing to offset a 1.5% decrease in member contributions.
FSC and UBS ascribe this to slower wages growth and the recent uncertainty around superannuation policy.
The report also calls for the Superannuation Guarantee rate to increase to 12% to avoid a retirement savings gap.
“The Australian superannuation fund sector has a critical role in minimising reliance on social welfare, through tax-effective and mandatory savings over a lifetime of work,” says the report.
“In terms of retirement income adequacy, the 12 per cent contribution rate is the fulcrum point at which retirement savings start closing the gap to income requirement.”
FSC/UBS say there is a 30-year process over which the superannuation system moves into positive fiscal territory, based on direct costs.
“The taxation cost becomes flat when the Superannuation Guarantee rises to 12 per cent of incomes, so the net fiscal effect is positive from then on.”
“In the meantime, concessional tax rates for superannuation are justified primarily by the principle of considering retirement income across an entire lifetime (both working and non-working) rather than just during labour-market participation.”
But “the tax foregone does not tell the whole story.”
“Alongside the fiscal benefits, the increase in capital stock from mandatory and tax-effective superannuation has important implications,” including the impact a doubling of savings, as a percentage of GDP, has on domestic capital availability and pricing, and on foreign debt.
The FSC, in it’s recent 2017/18 pre-Budget submission, called for the Government to return a schedule of reaching a 12% Super Guarantee rate by 2021.