The Association of Superannuation Funds of Australia (ASFA) has welcomed the government's decision to retain the Low Income Superannuation Contribution (LISC) for an additional few years, but says it is highly concerned about the impact that further delaying the increase in the Superannuation Guarantee (SG) will have on the community and their retirement outcomes.
ASFA CEO MS Pauline Vamos says policymakers should be focused on increasing the SG to 12 per cent as fast as possible, in order to ensure people save enough money to live with comfort and dignity in retirement.
“While retaining the LISC for an additional two years will provide a much-needed boost to the superannuation savings of Australia's lowest-paid workers, we are greatly concerned that the changes to the timetable for SG increases will leave many Australians much worse off in retirement.
“The reality is, at the present SG rate of 9.5 per cent, most people will not build up enough super to provide them with adequate financial security when they finish working. This is why ASFA has consistently held the view that the original timetable for phased increases should be maintained,” says Ms Vamos.
“We therefore urge the government to look at ways to increase the SG to 12 per cent as quickly as possible.”
Ms Vamos says this example highlights why it is crucial to establish objectives for the superannuation system and set long-term, measurable goals against which its progress can be assessed.
“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. Establishing a common purpose, goals and objectives for the system to be measured against, will help guide policymakers towards decisions that deliver the best outcomes for the community. This will help build the stability and certainty required for people to plan for their retirement with confidence.”
Consistent with its submission in response to the Financial System Inquiry's Interim Report, ASFA believes that by 2050, the superannuation system should:
- limit Age Pension expenditures and tax expenditure on superannuation (properly measured) to less than 6 per cent of GDP
- reduce the number of retired Australians relying solely or almost exclusively on the Age Pension by half to 20 per cent
- achieve an income replacement rate in retirement in terms of household disposable income in excess of 65 per cent (on average)
- ensure that at least 50 per cent of Australians in retirement meet the comfortable level of the ASFA Retirement Standard.
“These objectives will help deliver better consistency in policy decisions, and allow the industry, governments and the community to assess whether or not the superannuation system is delivering on its purpose.
“Under the revised timetable of SG increases, the system will not be on-track to meet these objectives. This means many people will not have enough superannuation to provide for the lifestyle they want in retirement, and the savings to government on Age Pension-related expenses may not be as great as initially projected.
“This is why any changes to super should be considered in the context of how they will impact the ability of the superannuation system to meet these objectives,” Ms Vamos concluded.
For further information, please contact:
Lisa Chikarovski: Manager - Consumer Strategy, Media and Public Affairs, 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, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.