Abbott's "Sad Decision" re Superannuation Guarantee

The $1.5 trillion super industry and its veterans have lashed the Coalition's plans to defer the increase in the compulsory superannuation guarantee, labelling it a "sad decision" that would slice $46 billion from retirement savings over the next decade.

The Coalition had pledged not to rescind the increase in the superannuation guarantee (SG) to 12 per cent by 2020, but last night in its budget reply said it would defer reaching the 12 per cent level until 2022. Under the plan, the SG would remain at 9.25 per cent until July 2016, with Opposition Leader Tony Abbott saying this would save $1.1 billion in 2016-17 and more than $2.5 billion over forward estimates.

The Financial Services Council (FSC), a lobby group for retail super funds and fund managers which previously threatened an industry campaign against future changes to the industry, called on the Coalition to "unequivocally re-commit" to increasing the SG to 12 per cent by 2020, rather than 2022.

Labelling the decision a "bitter disappointment" and a "short-term decision", the FSC estimated the deferral would diminish retirement savings and "push the increased cost of an ageing population onto future generations.”

“Australians need a stronger commitment from the Coalition ... They must unequivocally re-commit to increasing the Superannuation Guarantee to 12 per cent," it said.

John Brogden, CEO of the FSC said: “Last night’s announcement is a bitter disappointment and a blow to the retirement savings of Australians.”

“This short-term decision to defer 12 per cent superannuation will reduce retirement savings by $46 billion over the next 10 years”, he said.

“It will also push the increased cost of an aging population onto future generations.”

Mr Brogden also said: “There is a very strong public policy and economic rationale for raising the Superannuation Guarantee to 12 per cent.”Between July 1992 and June 2003, when the Superannuation Guarantee was lifted to 9 per cent:

• Australian GDP growth averaged 3.9 per cent per annum;
• Unemployment fell from 11 per cent to 6.1 per cent;
• Labour productivity grew strongly, above its 30 year average, at 2.2 per cent per year;
• Real unit labour costs fell over the period by 4.4 per cent; and
• Business profitability grew by 6.1 per cent a year.

“For Australians to retain confidence in the Coalition’s pledge to make no adverse changes to superannuation in their first term, there must be a guarantee that compulsory superannuation will increase to 12 per cent by 2021-22”, Mr Brodgen said.