Associate Professor Anthony Asher
Higher “superannuation guarantee” contributions are an assault on the poor and the young. They only seem a good idea to those who can afford to save, or who do not understand the pressures on the young, or perhaps will benefit from the additional fees flowing into the financial services industry.
Australians in the lowest income brackets already have more money after they retire than before. If super contributions go up, they will receive even less in their pay-packets now.
Increases to super contributions hit hardest at working mothers, who are spending a large chuck of their energy and finances on their children. They already work harder than any other group in society: research suggests that an average of 80 hours a week including domestic work is the norm. Those most exposed are single mothers and mothers repaying mortgages, who are probably worse off.
The higher contributions do not just hit the poor. One reason for misunderstanding is that many older – middle class – people bought their houses when average prices were 3 times average wages, and it cost a month’s wage to send a child to a good private school. These people seem to have difficulty seeing that needs have changed significantly when house prices are 6 times average wage and it costs six months’ wages to pay private school fees for 3 children. Taken together, these additional costs can take 15% of a lifetime’s earnings and so should also lower retirement income.
If government and the superannuation industry were serious about improving people’s retirement income, they would focus more energy on facilitating proper lifetime pensions. Properly designed, these can increase spending power in retirement by almost 20%. This would also stop the situation where men spend their superannuation proceeds and leave their widows to live off the pension.
Anthony Asher is an Associate Professor of Actuarial Studies at the Australian School of Business, University of New South Wales.