Labor plans huge superannuation overhaul raising contributions to 15 per cent: Anthony Albanese


Labor plans huge 15 per cent super overhaul to give YOU tens of thousands more dollars for retirement – and a new rule to make sure you actually get it

  • Scott Morrison raised employer superannuation contribution to 12 per cent
  • Labor confirmed it plans to boost it to 15 per cent but still unsure how to do it
  • Also considering forcing businesses to pay it at same time as wages 

Anthony Albanese‘s government is plotting a radical change to superannuation that would give every Australia a much biggest nest egg when they retire.

Labor wants to raise employer’s compulsory contributions from 10 per cent to 15 per cent, giving a worker on $90,000 a year an extra $174,016 when they retire.

The Coalition government under Scott Morrison raised it to 12 per cent by 2025, but Labor campaigned on a commitment to boost it beyond that. 

‘We’re focused on 12 but the longer-term objective is 12 to 15,’ Financial Services Minister Stephen Jones told Daily Mail Australia last year.

Mr Jones on Wednesday confirmed the government would raise the superannuation rate to 15 per cent.

Financial Services Minister Stephen Jones is sworn in by Governor-General David Hurley. He confirmed Labor plans to raise super contributions to 15 per cent

Financial Services Minister Stephen Jones is sworn in by Governor-General David Hurley. He confirmed Labor plans to raise super contributions to 15 per cent

Labor wants to raise employer's compulsory contributions from 10 per cent to 15 per cent, giving a worker on $90,000 a year an extra $174,016 when they retire (stock image)

Labor wants to raise employer’s compulsory contributions from 10 per cent to 15 per cent, giving a worker on $90,000 a year an extra $174,016 when they retire (stock image)

However, he said when and how that milestone was achieved needed to be investigated over the next few years.

‘We’ll look at the pathways beyond 12 per cent towards the backend of this term, but there’s no present plans for that,’ Mr Jones told the Australian Financial Review.

Mr Jones said he wanted to ‘bed in what we’ve got in place and look at the circumstances as we approach the end of this term for where we might go for some of those more aspirational things’.

Raising super to 15 per cent would boost monthly compulsory contributions from $437 to $625 for a worker earning $50,000, giving them more than $100,000 more in their account by retirement over 42 years.

At the other end of the scale, monthly additions would rise from $1,312 to $1,875 for those on $150,000, increasing nest eggs from $1,170,333 to $1,496,613.

‘It’s clear that the super guarantee rise puts Australians firmly on track to achieve the dignified retirements they deserve,’ Association of Superannuation Funds of Australia deputy chief executive and chief policy officer Glen McCrea said. 

Average superannuation balances for men aged 35 to 39 stood at $83,723 in June 2019, compared with $66,611 for women, figures from the Australian Taxation Office and the Association of Superannuation Funds of Australia showed

Average superannuation balances for men aged 35 to 39 stood at $83,723 in June 2019, compared with $66,611 for women, figures from the Australian Taxation Office and the Association of Superannuation Funds of Australia showed

How much super you should have by age

25: $31,000

30: $68,000

35: $112,000

40: $164,000

45: $219,000

50: $285,000

55: $360,000

60: $449,000

65: $535,000

Source: Association of Superannuation Funds of Australia based on ages as of 2020 

Advertisement

Labor is also considering forcing employers to make the super contributions at the same time as they pay the employee.

Many businesses pay the super quarterly to better manage their cashflow, but Mr Jones said this helped led to $4 to $6 billion worth of unpaid super a year.

Industry Super Australia claimed forcing companies to pay it immediately would help them keep track of it, and prevent it being unpaid if the company collapsed.

But not everyone is in favour of the change, with business groups and some economists warning the extra cost for bosses will limit wage growth and stifle the economy.

The Grattan Institute argued workers would end up paying for most, if not all, the superannuation increase in lower wages.

‘Our work shows that 80 per cent of the cost of super comes via lower wages within 2-3 years. And the long-term impact could be as high as 100 per cent,’ Brendan Coates wrote. 

‘Forcing the entire workforce to save more for their retirement by increasing compulsory super is not the way to prevent senior Australians suffering poverty in their later years.’

The business lobby also raised concerns about the ability of small and medium businesses to afford higher superannuation contributions. 

Australian wages, however, have been stuck below the long-term average of 3 per cent since mid-2013.

The Association of Superannuation Funds of Australia said retirees faced the worst cost of living pressure since 2010. A single retiree's annual expenses in the year to March rose by 4.7 per cent to $46,494 (pictured is a stock image)

The Association of Superannuation Funds of Australia said retirees faced the worst cost of living pressure since 2010. A single retiree’s annual expenses in the year to March rose by 4.7 per cent to $46,494 (pictured is a stock image)

While higher, pre-Covid population growth has boosted economic activity, Mr Jones said there was a link between weak wages growth and elevated immigration levels of 200,000 a year, from 2012 until the pandemic began in 2020.

‘It’s pretty clear that whilst immigration has added to overall growth, it’s suppressed wages particularly in some occupations,’ he said.

‘Instead of having to pay local workers more to attract or retain them, they’ve relied on a pool of workers coming in either temporarily or permanently from overseas to meet their labour needs.’

From July 1 last year, Australians fortunate enough to get a pay rise were able to put up to $27,500 a year into their retirement savings, up from $25,000, and only pay 15 per cent tax.

That is half the usual marginal tax rate of 32.5 per cent for most workers earning between $45,001 and $120,000 a year.

HOW MUCH MORE WILL YOU HAVE WHEN YOU RETIRE? 

$50,000 

Monthly super contributions would increase from $437 to $625 under Labor’s plan increasing retirees’ nest egg from $360,170 to $468,930.

$60,000

Monthly super contributions would increase from $525 to $750 under Labor’s plan increasing retirees’ nest egg from $441,186 to $571,698.

$70,000

Monthly super contributions would increase from $612 to $875 under Labor’s plan increasing retirees’ nest egg from $522,202 to $674,466.

$80,000

Monthly super contributions would increase from $700 to $1000 under Labor’s plan increasing retirees’ nest egg from $603,219 to $777,235.

$90,000

Monthly super contributions would increase from $787 to $1125 under Labor’s plan increasing retirees’ nest egg from $684,235 to $880,003.

$100,000

Monthly super contributions would increase from $875 to $1250 under Labor’s plan increasing retirees’ nest egg from $765,251 to $982,771.

$125,000

Monthly super contributions would increase from $1,093 to $1563 under Labor’s plan increasing retirees’ nest egg from $967,792 to $1,239,692.

$150,000

Monthly super contributions would increase from $1,312 to $1875 under Labor’s plan increasing retirees’ nest egg from $1,170,333 to $1,496,613

*The projections are calculated using historical market returns for workers earning the same salary from 25 years of age to 67.

Advertisement

Source

Related posts