A clear majority of advisers say increases to the superannuation guarantee rate should begin ahead of schedule, an online survey has found.
Professional Planner’s poll asked advisers if the scheduled increase in the SG rate to 12 per cent should be brought forward. Respondents were given the following four options, with the results showing a clear preference for more immediate change:
- No, 2021 is the right time to start the increase (12 per cent)
- No, the rate should remain at 9.5% indefinitely (10 per cent)
- Yes, increases should begin immediately (50 per cent)
- Yes, increases should begin in 2019 (28 per cent)
The SG rate was legislated by the previous Labor government to increase over from 9 per cent to 12 per cent over seven years, starting in 2013. But it stalled at 9.5 per cent in 2014 under the Liberal Government. It was then frozen for three years as part of the May 2014 federal budget. Late last year, the scheduled start date for SG rate increases was pushed back to 2021, meaning the rate will not reach 12 per cent until the start of the 2025-26 financial year – seven years after the originally scheduled date.
The poll results reflect broad concern that the repeated delays in starting the stepped increase to 12 per cent have hampered savers’ efforts to build adequate funds for retirement. David Williams, founder of Mylongevity.com.au, says a number of factors have contributed to this perspective.
“The results suggest advisers realise that the doubt over age pension availability, ongoing increases in life expectancies, and costs for aged care will put pressure on personal funding,” Williams says.
Whilst agreeing with the need for and earlier increase to the SG rate, Bronny Speed, director at AccountantsIQ, says it needs to be weighed against wider economic factors.
“People want to save for retirement and fund their own destiny, so an increase in SG would be, prima facie, an option they’d want to consider,” Speed says. “But business is hurting and cash flow is tight. I’m definitely on the side of bringing the increase forward but I would suggest starting it in 2019.”
David Simon, principal adviser at Integral Private Wealth, supports this approach. He notes that whilst economic conditions aren’t ideal for an early increase in SG contributions, recent legislative restrictions on voluntary contributions have made changes to involuntary contributions particularly relevant.
“I see this as a classic battle [between] heart and mind,” Simon says. “The heart says to increase immediately, given current contribution limits, and the average superannuation balance. The mind says to defer, given wage growth has been so low that Australians are hardly saving.”
