The cut-off for the superannuation co-contribution scheme should be raised to 150 per cent of Australian average weekly earnings, according to Watson Wyatt managing director Andrew Boal.

The co-contribution currently kicks in for workers on $28,980 a year and phases down before disappearing at $58,980 a year, roughly the same as Australians’ average yearly earnings.

Under Boal’s proposal, the co-contribution would still be available to workers on as much as $85,000 per year. While the age pension would continue to be the retirement mainstay for those on below-average incomes, Boal said the co-contribution was the best mechanism to provide adequacy for middle Australia, because it would not erode employers’ global competitiveness like further hikes to the super guarantee might, and allowed people the choice to provide for either a “modest or more comfortable” retirement.

He argued an emphasis on co-contribution was also the best option for low income workers, given the historical trade-off between increases in the super guarantee and wage rises. “For someone on $30,000, combining the age pension with the bit on top from compulsory superannuation will actually mean they improve their lifestyle in retirement. Why should they forego wage increases for higher compulsory super which they don’t need?” Boal said.

Director of policy and best practice at the Association of Superannuation Funds of Australia (ASFA), Brad Pragnell, said that “employers are already doing their bit” for retirement adequacy with the super guarantee at 9 per cent.

ASFA maintains that an overall contribution to super of 15 per cent of salary is still necessary for adequate retirement living standards. However, its 2007 pre- Budget submission recommended bridging part of that gap with an expansion of the co-contribution scheme to those on $60,000, with the rest to be made up by a new ‘soft compulsion’ system.

Pragnell said at presstime the details of ASFA’s soft compulsion proposal were still being finalised, for inclusion in its 2008 pre-Budget submission. However the Association last year sketched out a possible scenario whereby workers receiving a pay rise or starting a new job have up to 3 per cent of their wage contributed to super (on top of the 9 per cent SG) on an ‘opt-out’ basis.

Research released last year by ASFA found that nearly nine out of ten Australians surveyed support soft compulsion as a painless and flexible way to boost their super.