One Nation says its super proposal could put about $44 a week back into workers’ pockets, so we asked a finance expert to calculate what that decision could mean for Australians approaching retirement.
An extra $44 a week might not sound like much, but when the mortgage is biting, groceries keep climbing and another household bill lands, it can suddenly look pretty useful.
That is the choice at the heart of One Nation’s proposal to allow Australians paying rent or a mortgage to redirect part of their compulsory super contributions into their take-home pay for up to three years.
Under the plan unveiled by Pauline Hanson, employers would continue paying the full 12 per cent compulsory super contribution.
For people who opt in, 9 percentage points would remain in super and 3 percentage points would be paid to them by their super fund.
Existing super balances would remain untouched and the diverted amount would retain the concessional tax treatment it would have received inside super.
For a full-time worker earning about $90,500, One Nation says that would mean about $2300 extra a year after tax. That is about $44 a week.
But for Australians approaching retirement, there is another number worth considering. What might that $44 a week have become if it had stayed in super?
Starts at 60 asked Monash University finance expert Professor Susan Thorp to model what the proposal could mean for people much closer to retirement than the younger workers who have featured in much of the debate.
We asked her to look at two examples: someone beginning the three-year period at age 55 and someone beginning it at 60, both earning around $90,500.
And the timing makes a significant difference.
For the 55-year-old, Thorp calculated that just over $44 a week left in super over those three years would be worth $7410.90 by age 58, assuming a net annual return of 5 per cent.
Leave that money invested at the same assumed return, without adding another dollar, and she calculated it would grow to $11,497 by age 67.
In other words, roughly $44 a week in extra spending money today could mean about $11,500 less sitting in super at 67 under those assumptions.
For someone starting the three-year period at age 60, there is less time for compound returns to do their work.
Thorp calculated the forgone contributions would be worth about $9008 by age 67.
The figures are illustrations rather than predictions. Investment returns vary and the eventual outcome would depend on factors including earnings and investment performance, but they put a tangible price on the decision.
There is another side to the argument. For someone falling behind on a mortgage or struggling to keep paying rent, future investment growth may feel considerably less important than staying in their home today.
Hanson has defended the proposal on those grounds, saying she would rather Australians receive help now if they were facing the prospect of losing their home.
One Nation Treasury spokesman Barnaby Joyce has made a similar argument: there is little point promising someone a better retirement if they cannot afford their mortgage or rent today.
Thorp said the more meaningful financial question was whether the additional income would actually prevent a household falling into mortgage arrears.
Australians can already access super early in limited circumstances, including severe financial hardship and on compassionate grounds, although eligibility requirements apply.
Thorp also pointed out that falling into mortgage arrears carries its own financial consequences, from damage to a person’s credit record to the potentially much greater risk of foreclosure.
So for a household genuinely struggling to keep its home, the calculation is not necessarily as simple as choosing between spending money now and having more super later.
Thorp also raised questions about how the proposal would operate.
Super funds are primarily designed to receive and invest contributions during a member’s accumulation phase, rather than regularly return part of those contributions as income.
Under One Nation’s proposal, funds would be responsible for confirming eligibility, receiving the normal employer contribution, retaining at least 9 per cent, applying the concessional tax treatment and paying the diverted amount into the member’s nominated bank account.
They would also have to track each person’s three-year entitlement.
One Nation says the maximum participation period would be 36 months in total, and changing jobs or super funds would not restart the clock.
That would leave super funds responsible for much of the administration of a scheme that does not currently exist.
Australia has already had an experiment with giving people greater access to retirement savings during a financial crisis.
During the COVID-19 pandemic, millions of Australians withdrew money from super under the former government’s early-release scheme.
There is an important difference.
The COVID scheme allowed eligible people to withdraw lump sums from money they had already accumulated. One Nation’s proposal would leave existing balances alone and instead redirect part of future contributions.
Thorp said the COVID experience nevertheless demonstrated that many Australians would access their retirement savings when given the opportunity.
Industry modelling cited by the ABC estimates that a typical 30-year-old full-time worker using One Nation’s proposal for the full three years could receive about $6900 immediately but be about $25,000 worse off at retirement, including more than $18,000 in lost compound returns.
A 30-year-old, however, has decades for those lost contributions to compound.
Someone starting at 55 or 60 does not. That is why Thorp’s numbers for older Australians tell a different story.
How the choice is presented may matter too as Thorp said people can perceive a large lump sum differently from the equivalent amount spread across smaller regular payments.
An $11,500 retirement figure can look substantial.
Forty-four dollars arriving in your bank account each week can feel much smaller, but when someone is struggling with bills, that weekly amount can also have an immediate value that a future super balance does not.
Which brings the argument back to the individual household.
There is no answer that will fit everyone.
For someone financially comfortable, giving up future retirement savings for another $44 a week may be difficult to justify.
For someone trying to avoid mortgage arrears or serious financial hardship, the equation could look very different.
And Thorp leaves people considering the proposal with a simple question: “Are there other, less costly ways to get an extra $40–$50 a week than reducing a tax-preferred investment like superannuation?”
That may be the calculation worth doing before anything else for Australians approaching retirement.
ALSO CHECK OUT ‘ECONOMICALLY DISASTROUS’: HANSON’S SUPER POLICY PANNED
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With the cost living, $44 per week won't go far especially as not everyone has the same income, expenses etc etc
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