Government considers pausing superannuation increases

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The government finally released the findings from its Retirement Income Review on Friday, after being presented with the final report in July, and it appears poised to use the report to lay the groundwork to pause legislated increases to the superannuation guarantee.

The superannuation guarantee is supposed to increase from 9.5 per cent to 10 per cent by July 2021 and there are incremental increases planned before the rate reaches 12 per cent in 2027.

Prime Minister Scott Morrison committed to continuing the scheduled increase in superannuation at the last election, but now it appears the groundwork is being laid for this policy to be walked backwards.

Treasurer Josh Frydenberg, at a press conference announcing the review’s findings, said that the government would certainly consider pausing the increase before making a decision next year.

“This report is one voice and there have been many others in this space, including the governor of the Reserve Bank, who has pointed out clearly the trade-off between a person’s wages and the superannuation guarantee,” Mr Frydenberg said.

“The Grattan Institute has pointed out that trade-off as well, and we will make a decision by that time next year.”

Federal opposition leader Anthony Albanese said Labor would oppose any further delays to starting to increase the rate of the superannuation guarantee.

“This is a government that has never supported universal superannuation,” Mr Albanese said. “Universal superannuation is such an important reform, providing for retirement incomes for Australians, as we have ageing of the population.

“They (the government) look for any excuse to break the promises as they have done in each of the previous two terms of this coalition government. The fact is, we have a legislated increase for universal superannuation to 12 per cent. The coalition committed to not change that. But once again, they are laying the groundwork for another backflip …

“Make no mistake, Labor supports the existing 12 per cent superannuation that has been legislated and we’ll fight any attempt to undermine it, or change it, because that will be bad for workers in their retirement, and it is also not in the national interest.”

The report does not make any specific recommendations but instead makes a number of key observations, including support for the idea that increasing the superannuation guarantee (SG) would result in lower wages.

“A rate of compulsory superannuation that would result in people having an increase in their living standards in retirement may involve an unacceptable reduction in living standards prior to retirement, particularly for lower income earners,” the reports states.

“This is based on the view, supported by the weight of evidence that increases in the SG rate result in lower wages growth, and would affect living standards in working life.”

Industry Super Australia chief executive Bernie Dean questioned the findings linking growth in the superannuation guarantee to a slowing of wage growth.

He said that the super rate had increased just 0.5 per cent in the past 18 years and that, in that time, real wages growth had still been sluggish.

“We hope it (the report) will not be used to ask Australians to sacrifice hundreds of thousands in guaranteed retirement savings for a vague promise of a wage increase that history shows will not occur,” Mr Dean said.

“The two-thirds of Australians who support the legislated and long-promised super increase would not take too kindly to politicians, who pocket 15 per cent super on top of their generous salary, using this review to snatch away their retirement savings.

“This report’s findings must be used to support sensible reforms that will grow members’ savings, not cherry-picked to support preconceived policy ideas that will leave people and the nation worse off.” 

The review, which looked at the three pillars of the retirement income system (age pension, compulsory superannuation and voluntary savings including home ownership), found that Australia’s retirement income system is “effective, sound and broadly sustainable” but said there was room for improvement.

The review said Australia’s retirement system was complex and people needed an improved understanding of how it worked to avoid making mistakes when their working life had finished.

“Complexity, misconceptions and low financial literacy have resulted in people not adequately planning for their retirement or making the most of their assets when in retirement,” the report stated.

“Adding to complexity is the interaction with other systems, such as the aged care and the tax systems.

“People need better information, guidance and good, affordable advice tailored to their needs.

“A major misunderstanding is the view that ‘retirement income’ involves the return from investing superannuation balances rather than drawing down those balances to fund living standards in retirement.”

The report found that the Age Pension, combined with other support payments to retirees, was effective in ensuring most Australians achieved a minimum standard of living in retirement in line with community standards, but that older Australians renting in the private market were not in the same boat.

It also found that increasing the rate of rent assistance would only have a small impact on addressing this problem, stating that an entirely new response would be required.

According to the report, at June 2019, around 71 per cent of people aged 65 and over were receiving the Age Pension or other pension payments and over 60 per cent of that group were receiving the maximum rate.

“The report finds that the Age Pension over the last decade has increased faster than inflation and faster than wage growth and that the Age Pension has continued to reflect community standards,” Mr Frydenberg said.

“Australia’s Age Pension, based on gross earnings, is in the top 25 per cent of OECD countries.”

The report also revealed that the living standards for those Australians forced into retirement before they reached pension age were dependent on the level of the JobSeeker payment and that these involuntary retirees experienced higher levels of financial stress and poverty.

Read the full Retirement Income Review report.

What do you think of the report? Do you think the compulsory superannuation payments should be increased? Do you think the Age Pension provides an adequate safety net for those with small superannuation balances?

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Written by Ben

18 Comments

Total Comments: 18
  1. 0
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    Governments should not be involved in Superannuation increases, because their own system is different it should be done by an Independent Body, and it should have been 15% NOW, but each Liberal Government has made sure NO INCREASES HAVE BEEN MADE or slowed down. YET workers go out and vote for them doing themselves out of MONEY when they retire.

  2. 0
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    Politicians super ie: Australian Taxpayer’s funded welfare 15.4% the workers 9.5% . This incompetent crew of corruption will not be satisfied until they kill the aged off. Robbodeath wasn’t enough to stop there lies and cheating of which they would still be harassing people for if not brought to task. The morally corrupt and ethically bankrupt lnp would fit right into the former GDR Stasi.

  3. 0
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    Someone has to pay the super. An increase in super is an increase in wage costs. Some people prefer a pay increase rather than a super increase. Either way it’s a pay rise. Those struggling in small business cannot afford pay rises or have to raise prices. Price rises are inflation. Inflation means our pay is worth less. Back to square one but having gone through turmoil and stress.

    • 0
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      P.S. I want an increase in super without all the rest. Being on a comparatively low income I want a pay rise too.

    • 0
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      This a typical neoliberal comment with no basis in fact.
      Since Howard froze the increases wages have not increased either and the figures from past increases has not reflected that small businesses have been worse off.
      At a time of low inflation that sits outside the reserve bank window and has run out of levers the government needs to step up to get the economy moving.
      The Federal government in attempting to have a surplus is largely responsible for the economy slowing down, as the slowing of money to the private sector reduces their productivity and they have to borrow from the banks hence reducing the company’s equity, this is were companies find themselves going into administration. Which further slows the economy hence the GDP growth slows which then effects the government debt level.

      The Covid-19 has revealed the lie that Liberals are better economic manages, particularly when they have had to instigate Labor type stimulus to stop the economy crashing.

  4. 0
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    Howard froze a super increase and promised that increased wages would follow instead. As did Abbot and now Morrison… All the while federal politicians get a 15.4% SG contribution.

    • 0
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      Given their history it is to be expected that the LNP will come up with any excuse to minimise wages and superannuation.
      The fair was would be to tie wages to politicians wages as well as super to pollies super. Don’t hold your breath.

  5. 0
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    Easy to understand why businesses don’t want it. They have lost a considerable amount of money this year. I fully support holding off pay and superannuation increases. Pretty logical, I reckon.

    • 0
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      Business has been increasing profits for at least 20 years. When are they ever going to be satisfied with their wealth and share a bit with workers?

  6. 0
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    Putting off super increases now will result in much higher pension costs in the future. Cant the Gov see that? But then again, Governments aren’t too worried about the future are they…
    I have always paid into super. well before it became compulsory. When it came in, I got the original Super as a bonus but it then “took the lace of” any pay increase.

  7. 0
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    There is no doubt that SGC has contributed to the lack of wages growth and further increases would only exacerbate this. There is too little benefit in forcing people to be more self-sufficient at retirement – self-funded retirees do not get the same concessions as pensioners so why bust your gut to safe for retirement when those who laze around get all the benefits.

  8. 0
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    So butter wouldn’t melt in Josh Frydenberg’s mouth? Didn’t ScoMo tell us the big tax cuts to business would benefit us all? Well they got the tax cuts, but did it trickle down to better wages or super? As a prominent Liberal once said “pigs arse” Business is all about profit (read better the profit, greater the greed).

    Remember what the LNP government has given out so far to sustain jobs and prop up industry (businesses) , has been paid for from taxpayer funds, so no credit goes directly to Josh and his crew. I’m glad it was organized so well and yes that’s the credit due, but it’s not his money. Not only that, but Josh is well protected from poverty for the rest of his life again at the taxpayer’s expense.

    Seeing they have put a lid on wages and now attempting a lid on Super, how about spreading the hardship around? Why is there no lid on profits? Why do the well off consider it anathema to spread some of this wealth (usually accumulated by rorting the system and with government help) to the less fortunate?

    I agree, hardworking business people deserve good remuneration and so do hard working non business people, and yes there are a few bludgers that deserve condemnation, but there are third and fourth groups, those unable to work or provide for themselves. It’s up to the government of the the day to monitor and adjust the ‘system’ so:-

    (a) Businesses make a reasonable profit that covers all costs.
    (b) Wage earners make a reasonable living wage that covers average living costs.
    (c) The unfortunates (people unable to work) are protected from poverty.
    d) Older generations allowed to live their lives in peace and are physically, emotionally and financially supported.

    These four categories each have many many positive and negative attributes that can easily unbalance a harmonious and prosperous system. I personally feel we are about three quarters of the way there. For a start, I would say to become a prosperous nation, we should be concentrating on minimizing or eliminating the bad things that are wrong or unfair with these categories. The good things will automatically flow to all once proper protections are in place.

  9. 0
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    Morrison makes a LOT of promises but strangely they never come to fruition– he is a typical salesman

    He also protects his mates — when they have done many things wrong

  10. 0
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    The only thing that the current super system achieves is to enable some people to retire at their own expense while others retire more lavishly but paid for by the taxes of the former.

    Labor supporters should not be fooled by this issue. The increases would have favoured the bigtime insiders whose backsides polish the chairs of super boards – not ordinary workers.

    It would not have been an underhand way of forcing a hidden pay increase out of employers – they’re not that stupid.

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