Superannuation Guarantee (SG)

Super guarantee of 17.5% needed for comfortable retirement: Deloitte

Deloitte says super guarantee of 17.5%-19.5% needed for a comfortable retirementMuch greater contributions, and broad reform of the superannuation system, is required to provide a comfortable retirement for most Australians according to a report recently released by Deloitte. The report, Adequacy and the Australian Superannuation System A Deloitte Point of View 2014, argues for a dramatic increase in the Superannuation Guarantee rate, and a combined effort between government and superannuation funds to increase both retirement adequacy and member engagement.

The report forecasts that even by 2034 at least 75% of retirees will still receive all or part of the age pension under current eligibility. Also, according to ABS statistics, the next 10 years will see an additional 1.7 million Australian retirees and pre-retirees.

Deloitte says that, even with the move to a superannuation guarantee rate of 12% this will not be enough to provide for a comfortable retirement from superannuation. The calculations show that men would have to contribute 5.5% each working year, with women requiring an additional 7.5%, on top of the 12% superannuation guarantee currently scheduled . This would take the super guarantee rate to between 17.5% and 19.5%. Given the opposition to raising the rate to 15%, as some have suggested, this seems unlikely.

Also, this lower rate of superannuation contributions is made worse by successive governments reducing the concessional contribution caps, which according to Deloitte has “meant it is even more difficult for those close to retirement to claw back reductions to their super balances” from the GFC.

Read More »Super guarantee of 17.5% needed for comfortable retirement: Deloitte

Paul Keating proposes Longevity Levy to supplement Super Guarantee

The former Prime Minister Paul Keating has made an argument for both increasing the Superannuation Guarantee and creating a safety net for after super runs out, noting “You can’t save under super for 30 years or 35 years and then live another 30 years off from it”.

In an interview with Lateline Paul Keating proposed a ‘longevity levy’ of 2-3% of wages to fund an insurance scheme for the provision of “income support, aged care and aged accommodation”. An alternative also proposed would involve changes to the preservation rules so money remained in super for longer, or as Mr Keating put it “to quarantine, say, 25 per cent of it where preservation rules would apply where they can’t touch it till 80”.

Recent comments in a speech by the treasurer Joe Hockey have also drew attention to the adequacy of superannuation: “despite spending billions of dollars in taxation benefits for superannuation, by 2050 the ratio of Australians receiving a full or part pension will still be around four out of five”.

However when the Superannuation Guarantee was introduced by the Keating government in 1992 it was at 3%, and only reached 9% in 2002/03:

Historical rates for Superannuation Guarantee

Read More »Paul Keating proposes Longevity Levy to supplement Super Guarantee