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Keep super compulsory – says new white paper
“Compulsory superannuation has unambiguously improved the asset diversification of Australian households’ balance sheets, particularly for low-income earners,” according to the Association of Superannuation Funds of Australia (ASFA) in a major defence of the compulsory superannuation guarantee.
ASFA has issued a new white paper in which it has claimed that the compulsory nature of superannuation means that Australians today have an extra $500 billion in savings that they would not otherwise have.
Importantly, the ASFA research said that of that $500 billion, around $35 billion is additional savings of people in the bottom 20% by income (the lowest income quintile).
“Today, through superannuation, households outside the wealthiest 10% have exposure to equities, bonds, commercial property and nation-building infrastructure. Better asset diversification has improved the prospects for higher risk-adjusted, long-term returns for households.,” it said.
“That compulsory superannuation can counteract individuals’ behavioural biases to under-save, and so acts to enhance their long-term welfare, is a key public policy rationale to maintain and strengthen the compulsory superannuation system,” the ASFA white paper said.
Compulsory superannuation will continue to lead to improved retirement outcomes as the compulsory system matures – that is, as workers receive compulsory contributions at higher rates for longer periods of time compared with earlier cohorts of workers.”
“Assuming that the compulsory contribution rate increases to 12%, as legislated, ASFA estimates that around 50% of retirees will be able to afford expenditure in retirement at or above the ASFA Comfortable Retirement Standard by 2050, compared to around 20% currently,” it said.
The release of the ASFA white paper comes against the background of a group of Government backbenchers who have been arguing for superannuation to be no longer compulsory and for a further pause in the superannuation guarantee increase timetable.
It also comes against the background of the impending release of the recommendations of the Government’s Retirement Incomes Review committee.
The likely findings of that review will be discussed at Super Review's sister publication Money Management’s forthcoming Retirement Incomes Review webinar in which you can participate free by joining here.
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