While low-income earners would welcome more disposable income with a lower superannuation guarantee (SG) or no SG, it would need to be the duty of the tax and transfer system to look after the group, according to Rice Warner.
Rice Warner’s latest analysis said behaviour of individuals with high levels of disposable income in other countries, would largely spend most of their extra cash and not increase their savings.
“Some might have higher savings by buying more expensive residences, which is far less efficient for the economy than investing in infrastructure and businesses,” the analysis said.
“…Clearly, for those on modest incomes, the SG contributions add to their savings as they would have had little capacity to save otherwise. Those with higher levels of disposable income have more scope to determine how much to save.
“This is not always easy to measure, as the wealthiest families might appear to save less than they do due to negative gearing which is used to reduce personal taxes and to leverage assets. Similarly, people taking out large mortgages to buy a family home will have less disposable income, though the mortgage payments are also a form of regular saving.”
Rice Warner added that an increase in disposable income would prove to be temporary as tax rates increased to finance an increase in Government pension costs from the current 2.7% of gross domestic product to something closer to the OECD average of 8%.
Rice Warner noted that the industry should not expect super to solve everything as some issues required broader measures such as the tax and transfer system looking after low-income workers.
“We have pockets of retirement poverty which need to be addressed – such as those single pensioners who are renting in private markets,” it said.
“Females tend to have significantly less retirement provision than males. This should be addressed through a combination of superannuation policy, employment policy and availability of affordable childcare.
“The taper rate on the Age Pension is punitive for many people, especially in a low interest rate environment, and it should be softened.”
The research house has offered a silver lining after super fund returns saw the end of a five-month streak last month.
A survey of almost 6,000 fund members has identified weakening retirement confidence, particularly among those under 55 years of age, signalling an opportunity for super funds to better engage with members on their retirement journey.
The funds have confirmed the signing of a successor fund transfer deed, moving closer to creating a new $29 billion entity.
A number of measures, including super on Paid Parental Leave, funding to recover unpaid super, and frameworks to encourage investment in the energy transition, have been welcomed by the superannuation industry.
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