The The Association of Superannuation Funds of Australia (ASFA) is talking its own book again, calling on the government to extend Australia’s compulsory superannuation regime to low-paid workers. From The Australian:
The Association of Superannuation Funds of Australia will issue a lengthy discussion paper urging the government to review superannuation contribution rules for self-employed workers and to reconsider the threshold that disqualifies workers who earn less than $450 a month from receiving contributions.
Although there are about 220,000 workers who earn less than $450 a month, the current federal government is unlikely to lower or abolish the threshold…
Although there are no plans to make such a move, the government would prefer to increase the current threshold to a level above $450 on the basis that it would be better for those on lower incomes to have a greater amount of take-home pay rather than squirrelling away 9.5 per cent of a salary until retirement…
But ASFA chief executive Martin Fahy said… “The case for changes is strong,” Dr Fahy said. “For affected workers and in the absence of any policy reforms, a growing gig economy would mean lower superannuation balances at retirement. This would reduce the broader adequacy of the superannuation and retirement income system.”
The cost of compulsory superannuation contributions falls on the employee, not on the employer. Thus, it’s hard to see how forcing lower income earners to sacrifice more of their pay into superannuation would improve their living standards. Many are already struggling with the high cost of living, so it makes little sense to reduce their disposable incomes even further.
About the only winner from this policy would be the superannuation industry itself, which would get to ‘clip the ticket’ on more funds under management and earn fatter profits.
Indeed, there are few better rent-seeking industries to be in than superannuation, which is why reforms to fix the underlying problems in the system (e.g. excessive fees, unequal distribution of concessions on contributions/earnings, etc) is critical before policy makers even consider extending compulsory superannuation or raising the rate.
