Australian workers can look forward to a bigger nest egg, with an increase to the superannuation guarantee to add tens of thousands of dollars to the average super account.
From 1 July, employers’ minimum required contribution to employees’ superannuation accounts will rise from 11.5% to 12%.
It is the latest and last in a series of incremental increases from 9% over more than a decade since they were legislated by the Rudd-Gillard Labor government in 2012.
With the latest bump, a 30-year-old earning $60,000 would have an extra $20,000 in super by retirement, according to the Association ofSuperannuationFunds of Australia.
It will add about $300 each year to the superannuation of a worker on a $60,000 salary, or $500 for someone on a $100,000 salary.
“The system foundations are cemented for young, working people to have a comfortable retirement,” the ASFA chief executive, Mary Delahunty, said.
“It’s a moment all Australians should be proud of.”
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The association said the cost of a comfortable retirement had increased 1.6% in the past year, while the cost of a modest retirement rose 1.7%.
A “comfortable” retirement includes top-level health insurance, a reasonable car and leisure activities.
The cost of either outcome was increasing slower than Australia’s current 2.4% headline inflation but retiree budgets remained under pressure from rising food, energy and health costs.
Couples on average need $73,900 annually for a comfortable retirement, while most singles require $52,300 a year, ASFA says.
For a modest retirement covering the basics, couples needed $48,200 each year, singles $33,400, or for renting couples, $64,250, and $46,660 each year for singles who rent.
The figures underlined the importance of increasing Australia’s housing stock, Delahunty said.
“They also illustrate how super can be the difference between hardship and stability later in life, especially for renters.”
For some workers, the extra contribution would come from their existing pay package, according to CPA Australia’s superannuation lead, Richard Webb.
“It’s a good idea to check with your employer to see how they view the changes and what it means for you,” he said.
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Workers on contracts with a total remuneration package could see a slight drop in their take-home pay, while those on award or enterprise agreements would likely receive the contribution on top of their current pay.
When compulsory superannuation was introduced in 1992 – in part to reduce government spending on the age pension – only one in 10 Australian retirees listed super as a source of income.
Nine in 10 people between 30 and 50 now have super.
Governmentspending on the age pensionwasprojected to fallfrom 2.3% of gross domestic product in 2020 to 2.0% by 2062-63, despite a doubling of the over-65 population and a trebling of over-85s over the same period.
However, the super guarantee increase would not help those who missed out on paid work for extended periods, the Super Consumers Australia chief executive, Xavier O’Halloran, said.
“(For) people who have caring responsibilities or who have been locked out of the unaffordable housing market … increasing SG further won’t address those inequalities,” he said.
O’Halloran said there was more that could be done to support people struggling in retirement, when a significant portion of their autumnal years’ savings were made.
“Right now, there are no minimum standards for retirement products like there are for MySuper,” he said.
“There is also no performance testing of retirement products, so super funds can still sell poor products.”