Super just ‘not going to do it’, says ex-treasurer

Contributions of 9.5 per cent not enough to become a self-funded retiree: ex-treasurer.

super savings

Is this a case of stating the bleeding obvious?

Super contributions of 9.5 per cent will not be enough for someone to become a self-funded retiree. So says former treasurer Peter Costello.

“If you truly want to become independent of the Government, a self-funded retiree, live off superannuation, you're going to have to put your own money in, he told ABC television program 7.30.

“The occupational superannuation is not going to do it.”

The Superannuation Guarantee (SG) was introduced in 1992 and the rate is legislated to reach 12 per cent in 2025. So, many baby boomers have been a beneficiary of the SG for only part of their working lives.

With the cost of retirement a key concern for most older Australians, what is the solution?

University of Sydney Business School Professor Susan Thorp says an 18 per cent super contribution would be required for anyone aiming to become a self-funded retiree.

“If it were the case that people actually wanted to become entirely independent of the age pension, for example, they would probably need to start contributing about 18 per cent at the beginning of their working life and contribute that all the way through their working life,” she told 7.30.

“Most of us are, I think, probably realistically not prepared to do that.”

YourLifeChoices’ 2019 Insight Survey, which garnered 7760 respondents, shows that almost 53 per cent of older Australians receive a full or part Age Pension and only 27 per cent are self-funded retirees.

A Grattan Institute report, Money in retirement: more than enough, argued that most people would have enough money to retire on if the compulsory super rate was left at 9.5 per cent.

Many, including YourLifeChoices in an article written by publisher Kaye Fallick and titled Report paints a false view of retirement ‘heaven’, disagreed. Former prime minister Paul Keating, an architect of the SG, now says 12 per cent will “barely cut it”.

Mr Costello says that many people feel disassociated from their super.

“For most people they don't choose to go into it. The money is taken out of their wage by law. They know they can't get hold of it for 20 or 30 or 40 years.

“They don't feel as if it's theirs, they don’t feel as if they own it.

“The Government concentrated on getting money into superannuation by law, but didn't show much interest in what happened to it. Basically said, now it's someone else's responsibility.”

So, before it’s too late …

Take an interest in your super. Ensure your money is in a secure fund that has a proven track record of good returns and moderate fees.

Ensure you have one super fund and not ‘unintended multiples’. Despite repeated campaigns warning people of the costs of multiple accounts, nearly 40 per cent of all Australians have not yet heeded that advice.

The drain in having multiple accounts is magnified if they come with life insurance and total and permanent disability insurance.

And for women, the super conundrum goes to another level.

Paul Howes, KPMG’s partner in charge of wealth management, told the ABC: “The system I think has failed working women and one of the big flaws in the system was not recognising that inequality in the original design.”

Research by industry body Australian Superannuation Funds of Australia (ASFA) shows just 18 per cent of Australian women aged between 55 and 59 have saved more than $200,000 for their retirement compared with 37 per cent of men.

ASFA chief executive Martin Fahy said that was a nightmare scenario.

“Super is a narrative we tell ourselves so we can sleep at night, and at the moment women are having nightmares about their retirement,” he said.

Have you always taken an interest in your super? Have you made additional contributions over the journey?

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    COMMENTS

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    Daph58
    11th Apr 2019
    10:40am
    My lazy non-working, non super contributing, ex-husband took half of my super (I was putting in an extra 20% of my wages) when he decided to divorce - at my age (61) this has left me with no time to recover financially so I will have no choice but to access a government pension
    Karl Marx
    11th Apr 2019
    12:10pm
    I had the opposite with a lazy non-working, non super contributing, ex-partner (female) who received about 70% of my super. But I pulled the pin on the relationship.
    I will never become a nurse or purse ever again.
    I built up my super again but nowhere near to what it was.
    Rae
    11th Apr 2019
    2:54pm
    Yes but it's typical in Australia. If you are a lazy, non working dependent someone else always hs to go without for you. Usually the hard working and hard saving ones.
    Anonymous
    12th Apr 2019
    8:00am
    Yes Rae, and that's the way Labor wants it. Work hard and save well and they rip you off. Bludge and manipulate and they reward you richly. Sadly LNP have shifted to supporting that approach. Feed the lame ducks. Feed the rich. Rip off anyone in between. That seems to be the approach of BOTH major parties now, and definitely the Greens.
    MICK
    11th Apr 2019
    10:48am
    The biggest lie sold to the public in the last 6 years of this bad LNP government is that superannuation is going to be enough to retire on. What they don't tell you is that the employer contribution should have been going up. Instead its been stuck around 9.5% with employers crying "we'll be ruined" are they pocket billions of dollars and live the high life.....and then came the attack on wages and conditions we have witnessed to try and turn all workers into slaves.
    The superannuation contributions should be 15% by now, not 9.5%. We need a government to restore both wages and superannuation. Coming in May.
    almost a grey hair
    11th Apr 2019
    10:59am
    Or alternatively people could perhaps take control of their own destiny and secure their own future by salary sacrificing and investing instead of waiting for someone else or "the government" to help them out.
    Sundays
    11th Apr 2019
    12:02pm
    Bit hard to salary sacrifice in a climate where wages have not risen in real terms but the cost of living has, unless you are a CEO or equivalent
    MICK
    11th Apr 2019
    12:23pm
    We need both Almost grey.

    Remember that workers got 3.5% in lieu of a wage increase from the current 9.5% so employers have really only ever put in 6%. Of course they want to put in zero, push down wages and pay THEMSELVES more and more money so that they can live like kings. Company CEOs are the blatant example of this.

    The truth is we need to go back to government funded pensions for all and business, including high income earners and the wealthy, need to pay real tax rather than every reducing rates they are paying now....after their accounts fiddle the figures with schemes and deductions which would make a saint blush.
    cupoftea
    11th Apr 2019
    3:18pm
    workers 9.5% Politician & Public servants 15.5%
    cupoftea
    11th Apr 2019
    3:18pm
    workers 9.5% Politician & Public servants 15.5%
    Blinky
    16th Apr 2019
    12:03pm
    Dont hold your breath Mick. Labor has never said anything about improving the pension system, nor have the Libs.
    I guess the only thing u will get plenty of with Labor is wave after wave of boat people, who will cost the country billions, will flood the hospitals, schools n the welfare system n then will screw our economy. Just u watch. I am an independent voter, but would hate to see here those hordes of illegals that are not invading the EU and The USA.
    dstark
    11th Apr 2019
    10:59am
    Unions - the lifeblood of Labor wants there to be increased wages AND improved jobs security. Those who employ workers know that increased wages reduce the likelihood of their business surviving, thereby reducing job security.
    Sundays
    11th Apr 2019
    12:04pm
    Maybe some will have to cut obscene Executive Salaries. Millions saved right there
    Karl Marx
    11th Apr 2019
    12:14pm
    Employers & the rich have been spinning that same old, same old since the industrial revolution.
    Some just don't like their high exorbitant salaries & profits to be touched.
    MICK
    11th Apr 2019
    12:25pm
    A fair bit of rich man's BS there dstark.
    It is WELL ESTABLISHED that the earnings of the wealthy have been increasing at an alarming rate in the past 10 years. That negates your argument. Of course small business is generally in a different category for some but tradies have doubled their rates so they would have to be doing well.

    Your argument reeks of self interest and avoidance of the statistics. "We'll be ruined"?????
    Anonymous
    12th Apr 2019
    8:13am
    I just had to hire a tradie to do a very small job. Going rate $65 per sq m. He's charging $227! Out of 19 contacted, only two would quote and the other wanted $300 per sq m.
    That's a lot more than double. It's a disgusting rip off, and it's part of what's wrong with the country. But the biggest problem is that people who work hard and honestly and live responsibly are being demonised and robbed. How can superannuation work if you target people who just barely managed self-sufficiency and steal their savings. LNP attacked first, and now Labor is finishing the job. Seems neither wants superannuation to work as we all thought it was intended.
    Blinky
    16th Apr 2019
    12:11pm
    How about the obscene multi-million dollar salaries footballers, basket-ballers and the like are getting??? So u r good at kicking a ball around n u make more money than a scientist, a professor or a manager working x a large business???
    TMac
    11th Apr 2019
    11:00am
    Regardless of who is in power if you want to have a comfortable retirement you need to take on the responsibility for your own super and not just rely on the super guarantee (currently 9.5%). This is what I'm counselling my children to do.
    Theo1943
    11th Apr 2019
    1:21pm
    TMac suppose you tell your children to put in an extra 5% This is what 5% will cost and how much they will gain.
    Young person on min wage working part-time for 20 hours a week. Wages $20000, 5% is $1000. Pays no income tax. 15% input tax to the Super find $850 into Super. Net benefit Minus $150.
    Same person working full-time. Wages $37000, 5% is $1850. Marginal tax rate 19%. 15% input tax on super, $1573 into Super. Does not pay tax on the $1850 saving 19%. Out of pocket cost is $1499. Net benefit $74 this is actually a Government subsidy.
    $50,000 - 5% =$2500. $2125 into super 32.5% tax rate. Out of pocket cost $1688. Net subsidy $438.
    $100,000 - 5% =$5,000. $4,250 into Super. 37% tax rate. Out of pocket cost $3,150. Net subsidy $1,100.
    $200,000 -5% = $10,000. $8,500 into Super. 45% tax rate. Out of pocket cost $5,500. Net subsidy $3.000.
    Why do we subsidise the rich and penalise the poor?
    Theo1943
    11th Apr 2019
    1:44pm
    Oh dear, I forgot to factor in the 2% Medicare levy that will not have to be paid increasing everybody's subsidy, except for the part-time worker who doesn't pay Medicare. This will boost the subsidy to Mr $200,000 by another $200.
    Sceptic
    11th Apr 2019
    2:09pm
    1943, since when has keeping your own money been a subsidy?
    Theo1943
    11th Apr 2019
    2:13pm
    That's funny Sceptic.
    TMac
    11th Apr 2019
    2:26pm
    You can play around with as many numbers as you like however I have always wanted to take some control of the future. The other option is to do nothing, put the blinkers on and then blame everyone else when you get to retirement age and there is very little in the kitty. I know which option I'm suggesting to my kids.
    Theo1943
    11th Apr 2019
    2:37pm
    TMac of course you, and your children, should put money away for the future. The maths suggest you are better off putting it in the bank or under the mattress if you're earning under $40,000. Not that you're going to be saving much if you're trying to buy a house and raise a family on that.

    11th Apr 2019
    11:43am
    One doesn't need a degree in higher mathematics to know that the super system will only work properly when all workers have been subjected to a full working life on the higher deductions. Of course not all Baby Boomers will have a good amount of super tucked away, most of them started working in the 60's and super had it's nascency in 1992.

    There is a lot of yelling and screaming about governments not passing on the "full amount", whatever that may mean but governments don't pay the compulsory super, employers do. Those are the same employers that the ACTU want to fork out $42.00pw extra to give a "living wage". Unions and Labor are very quick to spend other people's money.
    ray from Bondi
    11th Apr 2019
    12:20pm
    you seem confused the super is lost wage rises over the years, this is what happens not what some liberal troll tells us.
    the government has set minimum standards for contributions by EMPLOYEES not EMPLOYERS as in your second paragraph.
    here are the facts for you dear reader to ensure that what you say or think is what is the truth.
    https://en.wikipedia.org/wiki/Superannuation_in_Australia
    MICK
    11th Apr 2019
    12:27pm
    OM - what will you say when robotics kills off half of our jobs? Always an out from you so that the rich can avoid paying their fair share (as a % of income). Some of your suggestions sounds like Trump repealing Obamacare and pushing destitute citizens onto the streets to die. Not nice. Shame.
    Anonymous
    11th Apr 2019
    12:37pm
    Thanks ray from Bondi, I read the Wikipedia article and I have a slightly different opinion to you. The reference about employees refers to where they lodge their super, whereas it is compulsory for employers to make superannuation contributions for their employees on top of the employees' wages and salaries.

    There is a mention about super in lieu of a wage rise but the date, 1983, is 9 years before the introduction of compulsory super which this article is about. I don't believe that you can conflate the two.
    Anonymous
    11th Apr 2019
    12:45pm
    Where does the "robotics" bit come from MICK? What has that to do with anything that was said? I'm getting quite tired of your continual bashing of the rich and multinationals not paying their fair share of tax when the truth is that all taxes in Australia are paid in accordance with the tax laws. Those who evade tax are charged and prosecuted.

    When Shorten takes over are you going to raise a petition to demand that Labor changes the tax laws so that the rich and multinationals pay more? BTW, please define "rich". You keep on with the politics of envy so beloved by your union bully boy mates yet you won't tell us who they are. When Shorten takes over his pay will be nearly half a million dollars, will that make him "rich"?
    MICK
    11th Apr 2019
    2:30pm
    "super in lieu of a wage rise but the date, 1983" - actually no. This happened in the early 1990s. Of course not all workers got this pay increase and it was mostly industry specific.

    So you have not heard that robotics will cut the workforce in half?

    You may be tired of my attacks on your privilege but the facts are that the wealthy always demand the next tax cut and find new ways to avoid taxes altogether. Tax Laws? Are you serious? Try laws for some, (different) laws for others.

    FYI I am already impacted by Labor's impending changes to franking credits and possibly capital gains tax going forward. Taking it on the chin despite its unfairness. The top end of town is decimated though but will find a way! Always does.
    You are of course correct that pollies earn enough money these days to bend the rules for themselves. You recall my calls to elect Independents previously, which I suggest should happen if Shorten changes his spots. Of course the current government is rotten meat in the barrel and no changes there even in the face of being spat out.

    I'm sure we'll argue some more as you sit on rich man's fence whilst I don't give a sh*t because a fair society is more important to me than losing out a few dollars. That's what you and you cohort miss OM. A harmonious society is dependent on some equity rather than the wholesale rape of workers. The French understand that well. So too will countries like America and Australia if they do not stop trying to take everything from average citizens......give me a break, I'm starting to sound like Karl Marx. Ahhh....
    Karl Marx
    11th Apr 2019
    12:06pm
    You need to start planning way ahead of the time you want to retire but most people under 40 don't care or are even interested in planning that far ahead.
    And to suggest that individuals self contribute from the start of their working lives, what rubbish when most will need every cent to pay for mortgages, children etc.
    Also keep your goals realistic & long term goals needs short term sub goals so you can reassess & adjust your long term goals as situations change & they will
    ray from Bondi
    11th Apr 2019
    12:21pm
    here here
    MICK
    11th Apr 2019
    12:28pm
    Correct but you may also want to factor in inflation as a big balance does not necessarily mean a comfortable retirement of any sort.
    Karl Marx
    11th Apr 2019
    12:40pm
    Mick, if you are able to pick a good super fund (forget the robbing retail ones) then hopefully their investments over a long period will grow at a much higher rate than inflation & leave a nice tidy sum.
    About time that the government also forced ALL self employed (especially tradies) to contribute into a super fund. I think ATM it's optional, not sure
    MICK
    11th Apr 2019
    2:31pm
    Certainly SFR. Agreed on all those.
    ray from Bondi
    11th Apr 2019
    12:14pm
    the only trouble with the compulsory 10% of a persons wages it that it is 10% in a time of struggle with absolutely no pay rises for the plebs, I heard on the right wing radio some time ago a business owner whing about the 10% saying that is coming out of his pocket, it just goes to show you what business thinks or understands that 10% is wage rises lost from the pay packet of workers with the promise that it will (yep sure just like all government promises) grow, and as we know all that has happened is that the rich shareholders have become richer of the fees and the like. I have already read of many workers over time that has lost the lot the business they worked for decided that the money would be better spent on itself.
    ray from Bondi
    11th Apr 2019
    12:22pm
    I know punctuation :)
    Karl Marx
    11th Apr 2019
    12:43pm
    Big businesses factor in the super contribution into their overheads which ultimately flows onto the customer. If small business aren't doing this then they need some financial advice & direction
    Anonymous
    12th Apr 2019
    8:08am
    Small business CAN'T factor in costs. They have to try to price match big business to survive. Typical Communist post - blaming the victims of economic terrorism for the problems it causes.
    Karl Marx
    12th Apr 2019
    5:08pm
    O&W, Obviously you don't know the first thing in running a successful business.
    There is no difference in running a coffee shop, corner store or a multinational like BHP, basics are the same, money in, money out & money in must be greater than expenditure.
    If small business isn't factoring in ALL COSTS associated with running the business then they are doing themselves an injustice & wouldn't know if they are turning a profit or not or whether they can outlay for more or better equipment etc.
    A lot of small business go to the wall within the first year simply because they don't know the first thing in business.
    NO. business will survive if they don't know the first thing about P&L. It's GOT NOTHING to do with communism, socialism or blaming it on economic terrorism.
    Anonymous
    13th Apr 2019
    1:42pm
    SFR, I HAVE run a successful businesses, and supplied management consultancy services to other businesses, and ghost-written books of business management advice. I have been employed to write Investment Memorandums, including developing financial plans, and I currently work on a part-time/casual basis in an accountancy business. So obviously YOU don't know the first thing about me and are ranting with ASSUMPTIONS - which make you an ASS.

    Small businesses don't enjoy the dominating powers and high advertising budgets of large businesses, so running them IS very different, and they often have to compensate in various ways for being unable to use big business formulae for calculating price. Usually the compensation is via personal and family sacrifice. They CANNOT simply increase prices every time the government decides to impose additional cost. Many have been forced to close due to government policy that imposes unbearable added costs and/'or reduces their capacity to adjust prices to compete with larger businesses in the same sector. Others enter or remain in the arena knowing full well that they will never be able to achieve more than marginal profitability (if any) but essentially buy themselves a job for personal reasons.

    You sound like an ill-informed government worker who has no idea how life is in the real world but works on idealistic theory. I've met lots like you in my life. They do horrendous harm with their ignorance but they are almost always grossly overpaid and afforded generous retirement benefits, and applauded in government circles for their arrogance and ignorance.
    East of Toowoomba
    11th Apr 2019
    2:12pm
    Lets not forget that quite a few employers refuse to pay Super on their employee's behalf. I have personally had to chase up two former employers via the ATO for unpaid Super.
    Anyone working part time or casual and earning less than $450 per month in wages from any or all their employers won't receive Super either.
    Aurora60
    11th Apr 2019
    2:58pm
    impossible to add to your super if you are looking for a job and can't find one because you are too old.
    Anonymous
    12th Apr 2019
    8:07am
    Don't even bother to try to add to super, Aurora60. If Labor wins it will be a disadvantage to have saved more than a minimal amount. They think people save to gift their savings to the tax man.

    12th Apr 2019
    8:05am
    How can anyone think superannuation can work effectively if we allow the IDIOTS in power to punish people for using it. Achieve marginal self-sufficiency and you are the target not only of financial attack by the government, but social attack by all the green-eyed who think you might have a little more than them and consider themselves more entitled. LNP attacked those who were close to being self-sufficient, and now any who adjusted their circumstances to be barely self-sufficient are being totally demolished by Labor - and denigrated and abused with vicious lies that have turned their own people against them.

    Clearly the politicians WANT universal poverty among retirees (except the very rich, of course. They are always exempt from attack)

    13th Apr 2019
    7:25am
    Labor wants to destroy superannuation. It's not thinking about worker retirement. It's looking for another way to steal billions from workers. Go check out the Shorten response to the budget, in which he clarified his franking credit policy - revealing that it will impact far more people than anyone believed and in far worse ways.

    "If the Bill Shorten plan was actually carried out, it would mean that more than one million people who will receive cash franking credits under the Bowen plan — including members of retail and industry superannuation funds — would not receive them.

    It would greatly shock a huge portion of the Australian population who, at this stage, don’t believe they will be affected because of the protection of industry and retail funds.

    It would mean a massive selling of banks, Telstra and other high-yielding franking dividend stocks. It would reduce the level of the sharemarket considerably and force a great many more Australians onto the government pension."

    13th Apr 2019
    7:25am
    Labor wants to destroy superannuation. It's not thinking about worker retirement. It's looking for another way to steal billions from workers. Go check out the Shorten response to the budget, in which he clarified his franking credit policy - revealing that it will impact far more people than anyone believed and in far worse ways.

    "If the Bill Shorten plan was actually carried out, it would mean that more than one million people who will receive cash franking credits under the Bowen plan — including members of retail and industry superannuation funds — would not receive them.

    It would greatly shock a huge portion of the Australian population who, at this stage, don’t believe they will be affected because of the protection of industry and retail funds.

    It would mean a massive selling of banks, Telstra and other high-yielding franking dividend stocks. It would reduce the level of the sharemarket considerably and force a great many more Australians onto the government pension."
    Karl Marx
    13th Apr 2019
    9:17am
    Fear tactics from a paid LNP righty troll
    Rae
    13th Apr 2019
    10:01am
    If you plan to raise $400 billion or so in taxes it has to come from somewhere.

    You keep railing against this but it would be better if you just did something to save your family savings instead. Change is scary but in this case it's needed and sooner rather than later. You can always buy back in if Labor don't get to pass the franking credit tax discrimination bill. Those getting out early will be the wise ones because the panic when those millions realise it affects them will be nasty.

    Between them the LNP, ALP and Greens have managed to destroy super anyway. People should still save but not in super funds controlled and manipulated by governments.

    Unless your returns are much more than $58 000 annually you'd do better holding assets in your own name rather than a super fund anyway. It's cheaper, more flexible and with very few rules involved.
    Anonymous
    13th Apr 2019
    1:20pm
    Actually, SFR, my quote was from a very well-balanced and objective report that complimented Labor on its negative gearing policy (though nothing that it was very badly timed) and it's capital gains tax policy (though noting that it needs a clause to guarantee re-adjustment as appropriate if inflation increases). It was NOT from any 'righty troll'. And I verified the information. But some of us deal in FACT, not left-wing propaganda.

    Yes, Rae, someone has to lose to raise $400 billion in extra taxes. What a shame people don't understand that government manages money poorly, and taking it from the populace simply means more waste and less economic growth.

    I have planned to save my family savings, but I am taking Alan Kohler's advice (and that of others) to not be hasty, as Shorten won't get his FC policy through in its current form. It will be watered down substantially. What bothers me far more than any personal financial risk is the social harm he is causing and the fact that he has made it very clear he will not govern for all Australians and the national good.
    Anonymous
    13th Apr 2019
    1:23pm
    BTW. It makes very little difference whether savings are in super or private in my situation, Rae. I've considered taking it all out, but there are advantages at present in leaving it as is. I would lose just as much in FC if the shares were privately held since my income isn't high enough to be taxed.
    Adrianus
    15th Apr 2019
    9:36am
    I agree OlderandWiser. One thing Shorten and his lefty mates are good at, is pulling the wool over the eyes of their supporters.
    Super ( if you accept the version of super as the SGC alone) wont do it for the member, but it will do it for those who control this great pot of wealth. The Mafia in the USA went from waterside to waste then to pension funds. Labor are the so called progressives with the party of ideas, but not one original idea have we heard from them.
    Adrianus
    15th Apr 2019
    9:36am
    I agree OlderandWiser. One thing Shorten and his lefty mates are good at, is pulling the wool over the eyes of their supporters.
    Super ( if you accept the version of super as the SGC alone) wont do it for the member, but it will do it for those who control this great pot of wealth. The Mafia in the USA went from waterside to waste then to pension funds. Labor are the so called progressives with the party of ideas, but not one original idea have we heard from them.
    Blinky
    16th Apr 2019
    11:56am
    Super works 0nly x those on a high income 'cause not only will they build a good super from their income but they can also afford to salary-sacrifice n put some extra dollars on their partners' super.
    It doesnt work x your average Aussie worker on an avg on low income "cause, if they had a super od, say $ 300k, that would not be enough n they would need a govt pension. THE PROBLEM is that, this super will count as an asset and will eat into his pension because centrelink will then deduct $3 × every $1k this person will have over the now very low threshold. In sum, this person's skinny super will be counter-productive because he will get but only a part-pension.
    This is a true OXY-MORON, if I ever saw one. I have mentioned this two both major parties but...THEY JUST DONT GIVE A DAMN ABOUT PENSIONERS, PERIOD!!!