As employers and employees prepare for the Superannuation Guarantee (SG) to increase for the first time in 11 years from 1 July 2013 with a trajectory to reach 12 per cent in the 2019/20 tax year, the Federal Coalition has vowed to delay the increase. A recent Mercer survey revealed that Australians’ support for superannuation is strengthening and many believe a delay in the increase would negatively impact their retirement savings.
According to Mercer’s latest SG Opinion Poll more than two in three working Australians strongly support the SG increasing from 9 per cent to 12 per cent. Forty four per cent believe any delay in boosting the SG contribution rate will have a negative impact on their retirement savings, with women and those aged 50 plus more likely to feel this way.
Under current legislation the SG rate will increase from the current 9 per cent with initial increments of 0.25 percentage points on 1 July 2013 and on 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the SG rate will be set at 12 per cent. The Coalition has declared it will delay the SG increase for two years from 1 July 2014, which would mean the SG would not reach 12 per cent until 2021 instead of 2019.
David Anderson, Mercer Managing Director & Market Leader, Pacific, said: “We believe increasing the SG to 12 per cent is necessary to ensure an adequate and sustainable retirement income for all Australians.
“Our latest survey confirms the majority of Australians agree with us and many are concerned that delaying the increase will impact the bottom line of their retirement savings.
“Delaying the increase could obviously bring short-term savings to the government’s bottom line, but we don't believe it is sensible long-term policy as delaying or decreasing superannuation savings will increase the future cost to Government of the Age Pension. In the long run such a move will prove to be a false economy, with the Commonwealth Government – and ultimately future taxpayers – forced to pick up the tab.”
The survey of 399 working Australians aged 18 to 65 years conducted in June 2013, found support for increasing the SG has grown in numbers and strength. In 2009, 63 per cent of working Australians supported an increase in the SG from 9 per cent to 12 or 15 per cent, this has risen to 68 per cent in 2013. Just over two in five (42 per cent) strongly agreed compared to 34 per cent four years ago and the amount who disagreed or strongly disagreed has halved from 20 per cent to 10 per cent.
Not surprisingly 60 per cent of respondents, who agreed with increasing the minimum contribution, believed having more money at retirement is the key advantage of the increase, however, 14 per cent believed the key advantage would be the lessening of economic burden on Government, society and tax payers.
Mercer’s SG Opinion Poll also revealed attitudes towards who should fund an increase in the SG. Australians increasingly believe the contribution onus should be borne by employers. In 2009, 49 per cent of respondents believed the cost of increased contributions should be a joint responsibility by both employer and employees – however this number has dramatically dropped to 26 per cent in 2013. Nearly half of respondents (45 per cent) now believe that the sole responsibility lies with the employer, compared to just 35 per cent in 2009.
“An increase to superannuation will be positive for the majority of Australian workers and our economy. Mercer’s Superannuation Changes Pulse Report showed that most employers are choosing to bear the incremental cost increases, rather than take a hit to employee morale and engagement. Employment costs could well rise from July onwards, and employers will need to build this into workforce planning and reward budgets,” said Mr Anderson.
“Increasing the SG from 9 to 12 per cent is the right long-term policy for all Australians. It is the right thing to do to ensure more Australians have a dignified retirement and to reduce the future cost to the Government of the Age Pension, particularly as our population is living longer.”
Mercer’s SG Opinion Poll key findings:
• Fifty-seven per cent of respondents aged 50 plus felt that a delay in the SG increase would have a negative impact on the superannuation savings, compared to only 23 per cent of those aged 18-29;
• Women, workers aged over 50 feel delay will be prejudicial to their super savings;
• Ten per cent of female respondents didn’t know if they did or did not support an increase in SG contributions, compared to 1 per cent of males;
• Those aged 18–29 were more positive than their older counterparts, as were males – with regards to rating superannuation as a way to save for retirement;
• Males were more positive when rating superannuation as a way to save for retirement with 47 per cent rating it very good or excellent, compared to 38 per cent of females;
• Only 5 per cent of respondents strongly disagreed to the increase in the Superannuation Guarantee, compared to 12 per cent in 2009;
• Thirty-three per cent of 18-29-year-olds believe that the increased contributions should be the sole responsibility of their employer, compared to 49 per cent of 30-49-year-olds;
• Forty-five per cent of respondents believe the SG contribution rate should be the sole responsibility of their employer – compared to just 35 per cent four years ago.
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