Super contributions set to rise

If passed into law, the proposed increase in superannuation contributions will give a huge boost to Australian’s retirement savings.

Divisional Secretary Chris Preston and Divisional President Gary Way were present at Parliament House when Assistant Treasurer Bill Shorten introduced the superannuation amendment bill into parliament, proposing to raise super contributions from the current 9 per cent to 12 per cent.

With the rises starting at 0.25 per cent from 2013 and increasing incrementally up to the full 12 per cent by 2019-20, employers and the economy will have plenty of time to adjust.

The impetus for the bill is to help build national savings and ensure future generations are not crippled under the burden of supporting the ageing population. Introducing the legislation Bill Shorten noted that today there are 50 people in work for every ten people in retirement, but by 2050 there will only be 27 workers for every ten retirees.

“The Superannuation Guarantee increase will boost the superannuation savings of Australian workers by around $500 billion by 2035. A proportion of these savings will be channelled back into the economy to fund jobs and nation-building infrastructure,” Shorten said.

He also noted that Australia’s superannuation savings are today worth $1.3 trillion to the nation – the fourth biggest pool of funds in the world. This enviable position is a result of forward thinking by the Hawke/Keating Labor governments, which introduced compulsory super in 1992 at a rate of 3 per cent rising to 9 per cent in 2002.

An Australian Institute of Superannuation Trustees (AIST) poll has shown that two thirds of Australians support an increase in the compulsory super rate, with only 14 per cent of people surveyed saying their current savings are sufficient to retire comfortably.

“It’s nearly 10 years since super contributions were last increased and yet we’ve known for many years that 9 per cent is simply not enough for a comfortable retirement,” said AIST CEO Fiona Reynolds.

Apart from the rate rise, key changes will be the lifting of the age limit for super contributions from 70 to 75, recognising that Australians are living and working longer.

And, from July next year, low-income workers earning up to $37,000 will receive a 15 per cent tax rebate on their superannuation contributions. This rebate will be credited directly into the person’s super account. This and the rise to 12 per cent will be a boost for women’s super savings which are generally around 40 per cent lower than men due to women taking more time away from paid work over their lifetime.