The Association of Superannuation Funds of Australia (ASFA) has rejected the proposal from the Grattan Institute to drop the longstanding bipartisan policy of raising the superannuation guarantee to 12 per cent.
Martin Fahy, ASFA chief executive, has said Grattan’s ideological hostility towards superannuation has blurred their judgement and their aversion to being self-sufficient in retirement poses a danger to current and future Australian retirees.
Fahy stated it is a fact that Australia’s retirement system is significantly increasing the retirement living standards for Australians, including low income earners.
For a 30-year-old earning $40,000 a year with a current superannuation balance of $20,000, the compulsory superannuation system will deliver an estimated $236,500 at retirement.
The retirement income will increase from $23,254 a year to $33,670 a year. The superannuation savings will continue to decrease the Age Pension entitlement in small amounts, contrary to the allegations of Grattan.
Fahy said that even a few extra thousand dollars a year can make a significant difference during retirement, allowing retirees to make essential home repairs, heat and cool their homes, visit the dentist, and occasionally eat out.
ASFA predicts that if legislation increases the superannuation guarantee to 12 per cent of a salary, 50 per cent of Australians will be able to live a comfortable retirement by 2050, which is just over double the current proportion.
Fahy observed that, with the Federal Budget being delivered, Grattan’s goal seems to be about saving money in the short term.
Fahy continued to say that Grattan is 'condemning' Australian retirees to a lower quality of retirement. Impoverished retirees have no way of funding rising health and aged care costs, as well as other challenges they face. Fahy also said that Grattan’s assumptions do not consider addition capital available to retirees, which generates higher income levels and living standards.
ASFA believes there should be a period of consolidation to allow changes to be settled and confidence to be restored in the system.