The introduction of legislation to increase the Superannuation Guarantee (SG) to 12 per cent is an historic moment for the country, the peak body for the superannuation and retirement industry said today.
The Association of Superannuation Funds of Australia (ASFA) said the move would be looked back on in the same way the introduction of the SG 20 years ago is; a forward-thinking step to secure a better retirement for more Australians.
ASFA also supports the decision announced today to abolish the age limit for SG contributions.
"This move will secure increased retirement savings for the majority of Australian workers," said ASFA chief executive, Pauline Vamos.
"We urge the Parliament to pass this legislation."
"As the population ages, we have looming costs in terms of health and aged care. It is vital that all parliamentarians take a long-term view on what is a population change certainty.
"Consumers get this. ASFA research confirms that 'having enough to retire on' is the number one financial concern of Australians.
"The research reveals there is widespread support for 12 per cent SG, with 67 per cent of Australians behind the move.
"The more people save today for tomorrow the more self reliant they become in retirement. The recent turmoil in Europe and the US, where there have already been cuts in state pension benefits, demonstrates the importance of self-reliance.
"It is also important to remember, particularly for many small businesses, that people in retirement are our consumers of the future.
"This is a policy where the long-term benefit is that it becomes self-funding to the Budget."
Ms Vamos said the increase was affordable and had been designed to minimise the impact on employers.
"The increase in the Superannuation Guarantee is funded by more than the Mining Tax.
"Employers and employees will have an extended period to negotiate the increase as part of wage negotiations. Remember the increase is over seven years in very small increments.
"In the scheme of things, this will mean very little compromise by either employers or employees. The relative yearly cost to Government of the initial rise in the SG is just $240 million; a very small portion of the expected revenue from the Mining Tax."
Allen Consulting Group research commissioned by ASFA shows an increase in the SG from nine to 12 per cent, implemented in 2013, will raise real GDP by 0.33 per cent by 2025 compared to the 'business as usual' scenario. In 2010 dollars, this is an extra $5463 million for the economy as a whole in 2025 compared to projections without the increase in SG.
The need for the increase in SG was underlined in the 2011 edition of the Pensions at Glance report by the Organisation for Economic Cooperation and Development (OECD).
According to the report, the gross replacement rate in Australia from the combination of Age Pension and mandatory superannuation at nine per cent, is 47.3 per cent for the average worker compared to an OECD average of 57.3 per cent.
"The OECD report strongly reinforces the widespread view that the current rate of superannuation savings is not sufficient to fund the standard of living in retirement that Australians want and need," said Ms Vamos.
"An increase to 12 per cent would assist in reducing rates of poverty in retirement that are relatively high by OECD standards.
"Single person households, particularly women, are at a greater risk of poverty in retirement if the SG is not increased.
"Australia has in place the framework for a world class retirement income system but higher contributions are required in order to deliver adequacy of retirement incomes."
Pauline Vamos, 0433 169 342
Rebecca Glenn, GM marketing and communications, 0416 170 439
Megan McDougall, communications and media co-ordinator, (02) 8079 0849
About ASFA - the voice of super
The Association of Superannuation Funds of Australia is the peak industry body representing the superannuation and retirement industry. Its members represent over 90 per cent of the approximately 12 million Australians with superannuation. ASFA members manage or advise on the bulk of the $1.3 trillion in superannuation assets as at September 2011. ASFA is the only organisation that represents all types of superannuation funds (retail, industry, corporate and public sector) and associated service providers.