Real choice in superannuation - The Centre for Independent Studies

It has been an article of faith on the left for several years that one of the best things that could be done to improve retirement for working Australians is to raise the compulsory super contribution rate.

Currently set at 9.5%, legislation has been in place for some time mandating an increase to 12% (scheduled to take place by 1 July 2025).

The Coalition has had the good sense to delay it once already. They need to go further and scrap it altogether. It offers little benefit and a whole lot of downside.

There is no question from an economic perspective that superannuation is paid for by reductions in workers’ take-home pay. This fact was something that more or less everyone used to agree on (from Paul Keating on down), at least until it became politically convenient to pretend otherwise.

The Grattan Institute found that the increase in compulsory super will strip $20 billion a year from workers’ wages.

It is scandalous that, at a time when we are battling low wage growth, that we have committed to further wage reductions for the next six years.

For low income people in particular super is a bad deal. High fees, low returns, multiple accounts, useless insurance and a reduction in much needed take home pay leading to difficulty in buying a home and supporting a family — all for what? A mediocre super balance and a lifetime on the age pension.

Super should be voluntary, at least for those earning minimum wage and below.

Offering people a tax-efficient option to save for their retirement during their working lives is absolutely mandatory. Compelling everyone to do so is mistaken policy.

Nor should we be concerned about the misuse of the tax concessions under a voluntary system. With caps on concessional contributions and concessional balances in retirement, the system is already set up to prevent it.

In his maiden speech to Parliament, newly elected NSW Senator Andrew Bragg made a case for voluntary super simply. He said, ‘I do not believe this system is working for Australians.’ Spot on.