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Drastic life changes needed if SG kept at 9.5%
Half of all middle-income Australian families will not reach the benchmark of a retirement income that is 65% to 75% of what they earnt while working if the superannuation guarantee (SG) is frozen at 9.5%, according to Industry Super Australia (ISA).
ISA’s latest report on the SG said when “more realistic assumptions”, compared to the Government’s Retirement Income Review (RIR), were made the replacement rate fell to 55% if the SG stayed at 9.5%. The RIR’s modelling said the replacement rate would be at 84% if the SG stayed at 9.5%.
If the SG was raised to 12%, as it was legislated to, the replacement rate was higher at 62%.
“Across all income levels an SG rate of 12% will increase the proportions who at least achieve the replacement rate benchmark of 65% to 75%. Those in the third, fourth and sixth income deciles are among those who will benefit the most. In addition, increasing the SG to 10% in 2021 will benefit many low-paid and disadvantaged groups,” it said.
“Over six million workers will see their contributions increase. Around 63% of those who will benefit from the increase are on wages below $70,000. Occupations that will benefit include labourers, sales workers and drivers.
“More workers aged 20 to 29 years will benefit from the SG increase than in any other age group. This will assist younger workers who have exhausted or drastically reduced their super savings by using the Government’s COVID-19 early release of super scheme to rebuild their balances.”
ISA chief executive, Bernie Dean, said if the Government froze the SG at 9.5%, millions of super members would not have enough for retirement and would have to drastically change their lifestyle.
“For some people it could mean choosing between a night out or keeping the heater on, and for others it might mean selling their house just to keep going,” he said.
“If the Prime Minister breaks his election promise many Australians will wonder why 9.5% is enough for them but not for politicians who all pocket 15%.”
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Employers should not be responsible to fund the retirement needs of employees, at some point we all must be accountable for our own financial position in retirement As an employer I would be open to some type of incentive plan to encourage employees to contribute personally into super.