Ask Paul: Should we have the option to pocket extra super contributions?


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Dear Paul,

I'm 35 and a fan of your books. I wanted to ask you about the government's recent announcement regarding the increase of the super rate.

It has floated the questionable idea that when it raises the super contribution from 9.5% to 12%, it will give the employees the choice of whether to pocket the extra 3% or put it in super.

ask paul clitheroe increasing super contributions

I'd be interested to get your thoughts on this topic, especially given the economic situation. - Brendan

I'm torn, Brendan. On one hand I love the "pre-tax" nature of super. Despite our best intentions to save any excess income - in this case the 3% we may be able to choose not to put in super - I fear that the bit we receive in our pay each week or month will be frittered away.

Then again, many people simply need a bit more income for them and their families to get by month to month. I also get the "big brother" overtones of the government grabbing another 3% of our income and directing it to compulsory super. Also, plenty of people make a very good living out of our super, funded by our fees.

But I am not going to be a fence sitter here, although I know I will make a fair few Money readers pretty cranky. Seriously, I do understand that a minority of our population and probably most readers will legitimately say "hang on, I'll take the extra income and use it build quality assets, to fund investment loans" and so. Over time I think that a minority of people will do better using the money themselves. The trouble is that I think a lot of the money not contributed to super will be frittered away if we get a choice.

Thinking of the common good, our broader society, an ageing population and the critical role of savings in our economy and our lives, despite the Orwellian overtones of the state ruling our lives, I am broadly in favour of super being a compulsory 12%.

And, no, I would not give people the choice not to contribute the extra 3%. We have hardship clauses for accessing super in times of real need.

Also, thanks for reading my books Brendan; I hope they have been of some help.

Correction: An earlier version of this story said the Super Guarantee will increase to 12.5%. It will increase to 12%.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Sam H
April 21, 2021 7.24pm

Agree. It's forced savings. Despite people's best intentions to save and invest it themselves, I think most people will spend it, just because they can

Jarrad P
April 21, 2021 10.47pm

SG is scheduled to go to 12% not 12.5%, weird for Paul to get that wrong.

Money magazine
April 22, 2021 9.02am

Hi Jarrad,

You're correct that SG will increase to 12%. We have corrected the story now and apologise for the error.

- Money team