It has been almost 30 years since the Superannuation Guarantee was introduced by then-Prime Minister Paul Keating in 1992, with the aim of allowing working Australians to set aside enough cash to support them once they reach retirement, in-turn relieving dependance on the taxpayer-funded Age Pension system.
However, as we edge closer to the legislated increase of the super guarantee from 9.5 to 12 per cent, debate continues to rage between experts about whether the rise – which will see the SG climb by 0.5 per cent each year from July 2021 – will actually leave seniors better off.
Now a columnist for The Australian has questioned the purpose of the country’s retirement income system, suggesting Aussies could actually be better off under a scheme like New Zealand’s, or that of the UK, in which all retirees are eligible for a flat-rate pension, regardless of income, and can set aside extra cash if they wish.
“The simplicity would be as breathtaking as the benefits,” Adam Creighton wrote. “The whole means-testing apparatus could be swept away; we could forget about deeming rates. Pensioners, the fastest growing cohort of the population, would have greater incentive to work. There’d be no more need for retirees to engineer their affairs to ‘keep the pension’.”
Creighton also suggested that the current system is geared more towards benefitting well-paid fund managers, union officials and those on the sector’s payroll, whose wages are paid out of the $30 billion paid by members in fees each year, according to The Australian.
He added: “A primary purpose of superannuation is to provide highly paid jobs to tens of thousands of fund managers, union officials, directors, financial advisers, conference organisers, policy advisers and industry associations (apologies to any group I’ve missed).”
The economics editor’s comments follows new research published by the Grattan Institute which claimed that the planned increase to the superannuation guarantee could actually leave the average Aussie poorer.
Last week, the think tank claimed that “lifting compulsory superannuation contributions to 12 per cent of wages would make Middle Australia poorer”, alleging that the average worker could lose as much as $30,000 over their lifetime due to the changes, stating “more super means lower wages”.
It’s not the first time that the Grattan Institute has taken umbrage with the impending SG rise though, as CEO John Daley previously claimed that the current retirement income system is not working and actually leaving older Australians with more cash than they had when they were actually employed.
The latest Grattan comments were met with backlash however, as the CEO of Association of Superannuation Funds of Australia (ASFA) hit out at the think thank, describing the research as “selective and misleading”.
“The Grattan Institute’s latest missive on retirement funding continues the pattern of selective and misleading modelling that seeks to undermine a retirement system that is globally acknowledged as one of the best in the world,” Dr Martin Fahy said.
“Good public policy will always benefit from lucid, rigorous research and modelling. However, the Grattan Institute’s latest output is based on unsound assumptions regarding average earnings, working patterns, the future rate of the Age Pension, how the means test for the Age Pension works, and most importantly working Australians’ aspirations for a dignified retirement.”
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