27 March 2013
Let’s have a superannuation debate based on facts: ASFA
The Association of Superannuation Funds of Australia (ASFA) has called on industry and policy makers to take a step back and consider the facts around the key issues currently being debated in the media regarding the future of Australia’s superannuation system.
ASFA CEO Pauline Vamos says the shared goal of all stakeholders must be ensuring we have a sustainable superannuation system that delivers adequate retirement income to all Australians.
“With growing account balances and an ageing population there’s no doubt this may involve some changes to the system in the future, but it’s important these decisions are made based on facts and not fiction, particularly given they have the potential to impact many Australians.”
ASFA’S TOP 3 SUPER MYTHS
MYTH 1: Tax concessions cost the budget $32 billion last year alone
There has been a lot of discussion regarding the budget cost of the various superannuation tax concessions, which based on last year’s figures, was estimated at around $32 billion.
Once you take into account that the government is currently saving $7 billion annually in Age Pension expenditures as a result of super, this figure drops substantially. When you also deduct the leakage of savings into other tax-advantaged areas such as negative gearing which would occur with any decrease in tax concessions, a true estimate of the aggregate tax concession for superannuation on an ongoing basis would be around $16 billion. This is roughly half the figure in the Tax Expenditure Statement.
Many retirees rely on superannuation to supplement the Age Pension, giving them greater comfort in retirement. Importantly, without compulsory superannuation and its various tax concessions, around 50 per cent of couples and over 70 per cent of single people would have incomes in retirement no greater than a $1,000 a year in addition to the Age Pension.
“Tax concessions are a necessary feature of superannuation as they grow the pool for people to self-fund their retirement, taking pressure of the Age Pension in the future.” Ms Vamos says
MYTH 2: The majority of government support for retirement goes to high income earners.
The amount of assistance for retirement provided by the government is broadly comparable across the personal income tax brackets.
Not only has the amount of government assistance provided to individuals on very high income levels been substantially decreased by lower caps for concessional contributions, but when you take into account the Age Pension, tax concessions and rebates the present value of government assistance is around $300,000 over a person’s lifetime across the range of tax brackets.
“A lower income person will receive this mostly in the form of the Age Pension, concessionally-taxed contributions and the low-income superannuation contribution, while a person in the top income tax bracket will receive it as tax concessions for super,” Ms Vamos says.
MYTH 3: Government funds spent on superannuation tax concessions would be better directed at helping other areas of the economy
Superannuation does and will continue to play an important role in providing the foundations for economic activity and prosperity.
It currently lifts household savings by around 2 percentage points of GDP and with the upcoming increases in the compulsory Superannuation Guarantee, this is expected to rise to 2.5 percentage points of GDP.
“This helps Australian businesses and government to finance investment and infrastructure without having to rely unduly on foreign savings and investment,” Ms Vamos says.
Superannuation benefit payments, including lump sums, pension payments and insurance payouts, already boost domestic demand by over $50 billion a year and this figure could increase four fold by 2040.
While the increasing proportion of retirees in the future is projected to lead to a slowing of growth in GDP, without superannuation and superannuation benefits in retirement this reduction would be much greater.
“Superannuation provides business with the consumers of the future, delivering a boost to the economy which benefits all Australians,” Ms Vamos concluded.
For further information, please contact:
Pauline Vamos, CEO, 0433 169 342
Lisa Chikarovski, Media Manager, 0451 949 300
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.