The super guarantee has reduced the cost of providing age pensions below most other nations and the government should move ahead with the increase after a short delay to assuage concerns about wage growth, says actuarial researcher Rice Warner.
“It still makes sense for the SG to go to 12 per cent but we need to recognise that wage rises are likely to be low for a few years, and any increase will cut into disposable income for many people,” Rice Warner said.
“We do want certainty, and it would be better for the government to call for another delay rather than cutting it off altogether at a lower level. It is time for rational holistic thinking on the subject. Society could accept a delay in these difficult times, but why not think more laterally and tie any future SG increases to the forthcoming personal tax cuts to minimise the impact on disposable income.”
Rice Warner believes that super at 12 per cent will allow the government to spend more on “critical areas”, including aged care, and that tax concessions to increase superannuation – while a cost to government now – will be offset by reduced pension payments in future years, contradicting the Grattan Institute’s view that the higher aged pension would cost the government less than extra super tax breaks.
“Greater resilience means lower risk in the system – less risk for members and retirees, and less risk for the government,” Rice Warner said.
“This is one of the key advantages of the SG system – it smooths costs and improves benefits through real returns. Self-sufficiency also reduces the cost to government over the [long-term].”
Rice Warner believes that 35-40 per cent of the population should be partly self-sufficient in retirement, with the aged pension partially supplementing their income, while 40-50 per cent should be entirely self-sufficient through voluntary contributions and other wealth.
