Why Australia must continue with compulsory superannuation
Some MPs are claiming that superannuation is a waste of time for many Australians, but they fail to forget that for many people it’s the only extra cash they might get.
Big questions have been raised in the past week about whether Australia should increase compulsory employer superannuation contributions.
These payments, known as superannuation guarantee — or SG among trendy finance nerds — currently sit at 9.5 per cent of employees’ wages.
Every few months bosses everywhere send that money to super funds, gradually building a nest egg that will help millions of Aussies afford a better lifestyle in retirement.
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The SG is supposed to rise to 10 per cent in July 2021 and then to 12 per cent by July 2025, but Liberal MPs in several states have been calling for it to remain at the current level or lower.
One MP, Craig Kelly from NSW, said there was a strong argument for workers on lower incomes to access their super now, especially if it won’t change their pension entitlement.
New Liberal senator Andrew Brand, in his maiden speech to parliament, said compulsory super should be voluntary for anyone earning under $50,000 a year, and potentially voluntary for everyone.
These suggestions are ridiculous, and illustrate the short-term, vote-chasing thinking among today’s politicians.
Mr Kelly and Senator Bragg are obviously not going to retire on the age pension alone, which is currently worth just over $460 a week for a single person and less than $700 weekly for a couple combined.
They won’t have to worry about affording housing costs, energy bills, groceries and clothes on that pension-only income.
But every little bit of extra cash someone holds at retirement relieves financial pressure. If you have a $100,000 nest egg, that will deliver $100 a week of extra income for almost 20 years, not counting any growth in the investment.
Some of the MPs’ arguments are fair: yes, superannuation fees have been too high and there’s not enough transparency.
But they forget one huge factor: If we are left to save for our own retirement without any automatic savings system, most of us simply won’t do it. There’s too much fun stuff to spend money on, and retirement seems so far away.
It’s only when people reach 60 and 70 that they wish they had saved more.
Compulsory super gives every worker a head start to being better off financially.
Australians can either take an active interest in super or ignore it, as many do.
Either way, it’s much nicer reaching your 40s, realising that in a quarter of a lifetime you’ll get access to a handy slab of money, and having something significant in the kitty already.
The Association of Superannuation Funds of Australia says men aged in their early 40s have an average super balance of more than $100,000, while women average more than $60,000.
We shouldn’t take this away from everyday Aussies just as the compulsory super system is starting to mature.
Super alone won’t make you rich, but it will fortify your finances. If someone wants to take that chance away, repeat the wise words of The Castle’s Darryl Kerrigan: “Tell ‘em to get stuffed”.