Constant super changes 'undermine confidence'

Most Australian businesses planned to fund the proposed superannuation guarantee (SG) increase to 12% rather than take it from employees' pay at the time of the federal government's announcement of a seven-year freeze.

A survey of 500 small to medium businesses by Galaxy Research for Sunsuper found that businesses are in favour of helping staff save for their retirement. This means workers would not have contributed more of their own money to super.

The SG will remain at 9.5% until June 30, 2021, then increase by 0.5% a year until it reaches 12% in 2025. Australians will miss out on valuable employer contributions which 77% of businesses told Galaxy they would now reinvest in their own activities.

The average Australian will have $80,000 less in super at 65, reducing their retirement income by $15,000 to $20,000 a year, if the SG never reaches 12%, according to Daniel Smith, president of the Actuaries Institute.

Over the next 30 years the number of over-65s will double from 3.5 million (15% of the population) to 7 million (22%) and will outnumber the under-18s.

"At the present SG rate of 9.5%, most people will not build up enough super to provide them with adequate financial security when they finish working," says Pauline Vamos, CEO of the Association of Superannuation Funds of Australia. "Retirement planning is a long-term game but when the system is subject to short-term changes it undermines the community's confidence in superannuation.

Also the savings to the government on age pension-related expenses may not be as great as initially projected, says Vamos.

Smith disputes the claim by the Palmer United Party's Clive Palmer, who supported the freeze, that over 50% of Australians would be dead by the time they could access super. Based on the most recent Australian Life Tables, 89% will live to 65, says Smith, and the percentage will be even higher if longevity continues to increase. The average life expectancy for a female born today is 94 and for a male 93.

Delaying the SG increase will hit hardest those who are already at risk of retiring with an inadequate nest egg, says Damian Hill, REST Industry Super's CEO. "This includes women and lower-income, part-time and casual workers, many of whom are employed in the retail industry."

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