Industry Super has rejected bats by Liberal MPs at the scheduled increase to employer superannuation contributions, saying the 2021 rise will be essential to rebuilding consumers’ retirement savings post-COVID-19.
The superannuation guarantee (SG), or how much employers are required to pay off their workers’ salaries into their super accounts, has sat at 9.5 per cent since 2014. The mandated contribution is set to face its first increase in seven years to 10 per cent in 2021, before it eventually reaches 12 per cent in 2025.
But while the increase has already been legislated, Liberal backbenchers started to cast doubts on it last year, as the Grattan Institute estimated increasing the SG to 12 per cent would cost workers $20 billion a year from wages.
Speaking to the House of Representatives standing committee on economics, Industry Super chief executive Bernie Dean said the rise has only grown more important with the economic downfall during the coronavirus pandemic, particularly as people draw down their super early as part of the government’s early release response to COVID-19.
The chair of the committee, Liberal MP Tim Wilson asked if Mr Dean accepted that an increase in the compulsory superannuation guarantee could come at the expense of increasing wages.
“No. What we do believe, like many other Australians, is that the super guarantee increase is going to be more important than ever before in helping Australian members recover some of the savings that they’ve lost in recent times,” Mr Dean said.
“Can I just clarify why, you’ve got… hundreds of thousands of Australians at least unemployed, millions of Australians facing very serious financial pressure and of course the amount of capital available to businesses, then informing how many people they can employ. Do you still support the increasing of the compulsory guarantee next year?” Mr Wilson asked.
“Along with the Prime Minister and the Treasurer and the Assistant Treasurer, we still support the SG schedule, because it’s the law, and because members, Australians overwhelmingly look forward to those contributions,” Mr Dean said.
“If anything, the recent downturn, caused by the coronavirus pandemic, just reinforces why you would want to have a guaranteed increase in super contributions.”
Mr Wilson quizzed if Industry Super would prefer a scenario where the contribution was increased but with more people out of work, rather than keeping it where it is.
“Setting it up in such a binary fashion is a bit short-sighted,” Mr Dean said.
“The super guarantee has been in place for many [years]. I think it’s gone up less than 1 per cent in the last 17 or 18 years during which time wage growth has gone up at different speeds, as the economy has grown and unemployment has generally gone down. I think drawing a relationship between the number of people employed and the super guarantee is problematic to say the least.”
Mr Wilson responded: “Well Treasury does. The Grattan Institute does. The Reserve Bank does. Just not the beneficiaries of the increase in revenue, being who are going to hold the capital, and their representative body.”
Later on in the proceedings, Mr Dean reflected on the number of younger workers that would have their savings depleted during the coronavirus pandemic.
“Now that’s where the attention should be,” he said.
“How do we think those young people are going to recover the savings needed in that early part of their working life so that they’ve got a [meaningfully] sized nest egg that can mean they’re not fully relying on pension.”
Previously the SG rate had been set to reach 12 per cent by 2019, but the federal government changed the timeframe in 2014, deferring it to 2025/26.
Mr Dean said the delay had already cost super members.
“A 30-year-old, I think, with a balance of $30,000, on average wages, they were going to lose about $100,000 from their nest egg, because of that delay,” he said.
“We’re talking in the realm of around $100,000 less on a nest egg. If there was to be another freeze for that 30-year-old with a balance of $30,000 on average ages, if it was frozen at 9.5 per cent, it would be one and a half times that to about $150,000 for a household.
“You’re talking about a significant impact on people’s savings that they pick up at retirement. That has all those downstream consequences… about people’s reliance on age pension.”
Industry Super deputy CEO Mark Linden added the SG increase would alleviate future pressure on governments and allow people a “decent standard of living” in retirement.
Staffing levels at the prudential regulator will rise and consumer advocates will be given more cash under new measures outlined in Tuesday’s budget...
The commercial law firm has signed on to partner with Australia’s leading technology and innovation event for financial advisers. ...
Insurers and industry bodies are urging life insurance clients to get a COVID vaccine as soon as possible, amid social media speculation that getting ...