Mercer senior actuary, David Knox, is the latest to make the false claim that freezing the superannuation guarantee at 9.5% “will hurt average workers”:
Mercer senior actuary David Knox said… even with the full 12 per cent guarantee, the average full-time worker would finish with a super payout worth 58 per cent of their pre-retirement income.
Dr Knox said the sharply-falling rate of people who retire without a mortgage was a major risk that suggested retirees needed more cash in their super.
“Whilst the median income earner may be able to maintain their previous standard of living, the average full-time earner will need to save additional funds over and above compulsory superannuation if they wish to have a reasonable likelihood of maintaining their previous standard of living throughout retirement,” he found.
“We should recognise that the next generation will face the effects of the changing workforce, reduced home ownership and financial implications associated with an ageing population.
Earth to David Knox: raising the superannuation guarantee will lower workers’ take home pay and mean they have less money to enter the housing market or pay down their mortgage. This could leave them in a more vulnerable position at retirement.
Remember, the Henry Tax Review explicitly recommended against raising the superannuation guarantee, since it would lower take home pay and have a particularly adverse impact on lower-income earners:
“Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth. This means the increase in the employee’s retirement income is achieved by reducing their standard of living before retirement…
The retirement income report recommended that the superannuation guarantee rate remain at 9 per cent. In coming to this recommendation the Review took into the account the effect that the superannuation guarantee has on the pre-retirement income of low-income earners”.
The Henry Tax Review also warned that the budgetary costs of compulsory superannuation actually exceeds savings to the federal budget:
“An increase in the superannuation guarantee would … have a net cost to government revenue even over the long term (that is, the loss of income tax revenue would not be replaced fully by an increase in superannuation tax collections or a reduction in Age Pension costs).”
The Parliamentary Budget Office came to a similar conclusion in April:
“The increase in the superannuation guarantee to 12 per cent will likely lead to lower wage increases, shifting a greater proportion of earnings into the superannuation system”.
As has the Grattan Institute:
Even slower wage growth will be the result of increasing compulsory superannuation contributions from 9.5 per cent to 12 per cent…
If compulsory super contributions go up, wages will be lower than they otherwise. And the cut to wages from raising compulsory super is big. Really big. By the time it’s fully implemented in 2025-26, a 12 per cent Super Guarantee will strip up to $20 billion from workers’ wages each year, or nearly 1 per cent of GDP…
[Moreover] both the short and long term, superannuation tax breaks cost the budget more than they save in pension payments:
Mercer is clearly talking its own book here. It wants the superannuation guarantee lifted since that means more funds under management and the ability to ‘clip the ticket’ with more fees. Workers and the federal budget be damned!