The compulsory superannuation contribution should be frozen at 9.5
percent to encourage Australians to consider more flexible options
to save for retirement, according to a report out today.
The Grattan Institute says the federal government should reconsider
lifting the compulsory contribution to 12 percent warning that a focus on
superannuation alone won't necessarily provide an adequate or comfortable
retirement.
The study says it's a mistake to confuse superannuation with retirement
savings given that on average superannuation only accounts for 15 percent of
household wealth.
Grattan Institute chief executive John Daley told The World Today the
importance of superannuation was "overblown" and an increase to 12
percent ignores
modelling about the way people really save.
"If we do go to 12 percent we will be forcing many households to
in effect live less prosperous lives while they're working," Mr Daley
said.
"I think it's quite possible that we might see a government
rethink the currently legislated increase to 12 percent. It's already been
delayed a number of times so it's possible we might see that rethought."
The study comes as superannuation remains a hot political issues with
the federal government negotiating to convince the Senate to approve reductions
in tax breaks for super contributions.
The Grattan Institute research is also likely to anger the Labor
opposition and former Prime Minister Paul Keating who advocate a 15 percent
compulsory contribution as critical to retirement planning.
But John Daley says the 15 percent argument underscores the confusion
in the national debate between superannuation and alternative retirement
savings.
"It's needs to be around 15 percent if you assume people don't
saving outside and that's just not true," Mr Daley said.
Mr Daley said there were vested interests in the superannuation sector
- both retail and industry funds - who would immediately oppose the report's
findings.
And he agreed taxpayers were rightly cynical about superannuation
policy given the politicisation of retirement and super tax breaks.
"It's no surprise that people don't trust government not to change
the rules," Mr Daley said.
"But I think it's also perfectly rational for people to have some
of their savings where they can use it before they turn 65."
Peter, I will reproduce an email I have sent to Chris Bowen and the head of Andrea Slattery (head of SMFS association. Please note I am in an industry fund rather than a self managed one and have no vested interest in Andrea's business interests. In addition, I am a Labor voter, greens supporter and union activist. I usually side with the Grattan institute on most issues. The email is below:
ReplyDeleteDear Chris,
Just a few notes on the proposed changes to super.
I am 53, perform shift and almost own a modest apartment in Wollongong. I am a single income earner and my 21 year old daughter lives at home. At present, I have 289,000 in superannuation.
For the last few years I salary sacrificed $850 a fortnight to bring me as close as possible to the annual $35000 concessional limit for super.
The changes in super will have a massive impact on my retirement at the very time this pathetic government have back flipped on the post tax contributions of millionaires. The tax changes mean that I will be paying an extra 22 cents in the dollar tax on the $10000 extra I can no longer salary sacrifice.
There are many people worse off than me, but this decision has huge implications for me. I work 24/7 shifts and wanted to retire at 60.
When you decide to vote on the super changes, please take my situation into account. I understand retrospective argument for the rich, but I am not one of them.
Best wishes,
Chris Salisbury
Peter, I am 57 years old and of course looking towards how I endeavour to prepare for a comfortable retirement with my partner, however with continual changes to the superannuation rules this is becoming more difficult.
ReplyDeleteI note with interest your current and the Grattan Institute's recent article (The Superannuation Myth) suggesting that compulsory superannuation contributions should be frozen at 9.5 per cent and that Superannuation is not the only vehicle people use to save for retirement. This is not really a revelation for no one in their right mind would put all their savings eggs into a superannuation system where the rules continually change.
For most of us (The Electorate), we believe the debate for change has been driven by our Politicians to fix their mismanagement in running this country and its budget, not the superannuation system. This ongoing agenda will ultimately destroy electoral faith in what was in essence a vehicle that promoted self funded retirement rather than reliance on the governments pension system.
Ultimately, once the dust settles and people understand the new rules they will do what they have always done, reassess where and what proportion of their savings do they allocate to different saving vehicles. I suspect far less money will be allocated to the the superannuation system as faith in it as a stable savings vehicle and our Politicians wanes.
Whilst the majority of my lifetime savings has already occurred I worry for our future generations and whether the current changes will be the last, I suspect not.
Anonymous