The Association of Superannuation Funds of Australia (ASFA) rejects the Grattan Institute’s proposal to dump the longstanding bipartisan policy of lifting the Superannuation Guarantee to 12 per cent.
ASFA CEO Dr Martin Fahy said that Grattan’s ideological hostility towards superannuation continued to cloud their judgement on retirement income policy and that their aversion to self-sufficiency in retirement posed a danger to current and future generations of Australian retirees.
“This is just another contrived assault by Grattan on our world leading superannuation system.
“The fact is that the system is delivering significant increases in retirement living standards for all Australians, including low income earners.”
For a person aged 30 on $40,000 a year (below even median employment earnings), with a current balance of $20,000, the compulsory superannuation system will deliver an estimated $236,500 at retirement.
This will increase retirement income from $23,254 a year (the Age Pension) to $33,670 a year. Contrary to the assertions made by Grattan, the superannuation savings will only decrease the Age Pension entitlement by a small amount.
“Even an extra few thousand dollars a year will make a real difference in retirement – including allowing the retiree to undertake essential home repairs, visit the dentist, heat and cool their homes and have an occasional meal at the club”, said Dr Fahy.
Once the legislated increase in superannuation guarantee to 12 per cent of salary is introduced, ASFA projects that 50 per cent of Australians will be living comfortably in retirement by 2050, just over double the current proportion.
“This is a unique social policy achievement that we should view with pride, optimism and confidence for the future”.
Dr Fahy observed that with the Federal Budget to be delivered next Tuesday, Grattan’s goal seems to be all about saving Budget money in the short term.
“Grattan clearly doesn’t care about the adequacy of people’s retirement incomes or their quality of life in retirement - they are condemning retirees to be sicker, poorer and older for longer.
“Impoverishing retirees is no way to deal with the challenges they face, such as funding rising health and aged care costs. Ignoring these problems won’t make them go away.
“Stoking intergenerational tensions whilst conveniently ignoring the challenges posed by an ageing population represents a cynical approach to retirement income policy.”
Dr Fahy noted Grattan’s assumptions are self-serving as they do not take into account the additional capital available to retirees in the form of superannuation savings, which increase income levels and generate higher living standards.
“Grattan selectively considers the interaction of superannuation and the age pension for a very narrow cohort to covertly justify the diminishment of superannuation.
“The reality is that having more private savings, for all cohorts, results in better retirement outcomes.”
Dr Fahy acknowledged the changes to policy settings made in the Government’s 2016 Budget that made the superannuation system sustainable and equitable.
“The 2016 changes reduced the overall amount of tax concession for superannuation contributions by around $1.25 billion a year as well as increasing the proportion of concessions going to low income earners.”
ASFA considers that there should now be a period of consolidation to allow these changes to be bedded down and to restore confidence in the system.
“In next week’s Federal Budget the Government has a unique opportunity to re-affirm their commitment to retirees by simply leaving the system alone”, Dr Fahy concluded.
For further information, please contact:
Katrina Horrobin, 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.