The Federal Government’s plan to lift the Superannuation Guarantee (SG) from its current 9 per cent to 12 per cent unsurprisingly has widespread industry support. But it might be a surprise for some in the industry that the plan does not have universal and unequivocal community support.Legislation giving effect to the increase was introduced into Parliament yesterday.

Opposition to the move predictably comes from the other side of politics. The Shadow Minister for Financial Services and Superannuation, Mathias Cormann, was involved in a Senate Estimates hearing on the day of a roundtable hosted by Investment Magazine and sponsored by Challenger, but the Opposition Leader’s chief of staff issued a statement.

It said: “As you know, the Coalition’s position is clear and we do not support the super increase funded from the mining tax.”

But reservations also have been expressed by those representing low-income-earners and workers with broken employment patterns (particularly women) – and out in the electorate, raising the SG is far from the sure-fire election winner some think it should be.

CLICK HERE to read a full analysis

6 comments on “Super and consumer experts debate the SG increase”
  1. Recently the tax incentive for Super contributions was reduced to $25,000p.a. – will this be raised again with an increase in the contribution rate? I doubt it…..

  2. Pat Snippley

    @Ron Bird: I would be a little concerned at how ‘commencing with relatively small contributions’ might interact with the ‘miracle of compounding interest’…or precisely not…

    I’ve a different view. The Australian system is quite firm in prohibiting the present benefit of one’s super assets—so no art collections hung on your own walls, fair enough, but not the roof over your head? Why not look at relaxing this, within limits? Large chunks of the living-expense burdens facing those in their establishment phase are housing and education costs. Why not—as the Singaporeans do within their Central Provident Fund framework—permit the present benefit of one’s super assets in certain cases, where there is a clear investment purpose that is expected to provide ongoing support, including into retirement? I grant that housing is a clearer case, involving a real asset, but I contend that education could also be covered by such provisions, if done right.

    A key benefit of this would be not having to change the idea of a constant proportion contribution, whose elegance has considerable appeal, simplifying things greatly for employers.

  3. Pat Snippley

    @Ron Bird: I would be a little concerned at how ‘commencing with relatively small contributions’ might interact with the ‘miracle of compounding interest’…or precisely not…

    I’ve a different view. The Australian system is quite firm in prohibiting the present benefit of one’s super assets—so no art collections hung on your own walls, fair enough, but not the roof over your head? Why not look at relaxing this, within limits? Large chunks of the living-expense burdens facing those in their establishment phase are housing and education costs. Why not—as the Singaporeans do within their Central Provident Fund framework—permit the present benefit of one’s super assets in certain cases, where there is a clear investment purpose that is expected to provide ongoing support, including into retirement? I grant that housing is a clearer case, involving a real asset, but I contend that education could also be covered by such provisions, if done right.

    A key benefit of this would be not having to change the idea of a constant proportion contribution, whose elegance has considerable appeal, simplifying things greatly for employers.

  4. Although not wanting to debate the pros and cons of 9% versus 12%, what is totally inappropriate is any scheme that requires a constant contribution over an employees working life. What we should be concerned with is the ability of a person/family to meet their consumption needs over their life cycle and not only in their retirement phase. There is plenty of evidence to suggest that it is just inappropriate to require an individual in their establishment phase (typically taken to extend to their mid 30s) to devote a significant proportion of their income to meet their retirement needs. If we are going to have a compulsory superannuation scheme, then contributions should vary with age: commencing with relatively small contributions around the mid-30s which then progressively increase with age.

  5. Although not wanting to debate the pros and cons of 9% versus 12%, what is totally inappropriate is any scheme that requires a constant contribution over an employees working life. What we should be concerned with is the ability of a person/family to meet their consumption needs over their life cycle and not only in their retirement phase. There is plenty of evidence to suggest that it is just inappropriate to require an individual in their establishment phase (typically taken to extend to their mid 30s) to devote a significant proportion of their income to meet their retirement needs. If we are going to have a compulsory superannuation scheme, then contributions should vary with age: commencing with relatively small contributions around the mid-30s which then progressively increase with age.

< 1 of 2
Leave a comment