ISA said modelling from Rice Warner has revealed the the age pension would have to make up for the delayed super guarantee increase, climbing billions each year to reach an extra $33.3 billion (in today’s dollars) by 2058.
“Dumping the legislated increase in the SG will unequivocally leave Australians with less private savings at retirement and more reliant on the publicly funded age pension,” Industry Super Australia’s deputy chief executive Matthew Linden said.
The ISA opined that this could lead to future governments needing to hike taxes to meet the potential bulging pension burden.
“Figures from the government’s own Retirement Income Review reveal ditching the increase would leave all income groups with lower lifetime disposable incomes,” it said.
“A plan to make the increases optional, forcing workers to pay for their own wage increase from their retirement savings, would also add $20,000 to the tax bill of an Australian couple on average earnings, because wages are taxed at a higher rate than super contributions.”
The ISA stated that today’s average-earning 30-year-old couple would still lose $160,000 in retirement income, even after the taxpayer had been forced to tip in an extra $83,000 from the pension.
“There is no free lunch. For every dollar taken out of super early, the taxpayer has to pay back even more in higher pension costs – that’s why if the government opts out of super, it opts in to higher taxes,” Mr Linden said.
They also stated a plan to make the increases optional, forcing workers to pay for their own wage increase from their retirement savings, and would also add $20,000 to the tax bill of an Australian couple on average earnings, because wages are taxed at a higher rate than super contributions.
But the increased pension costs surpass any additional tax revenue.
“This shortsighted policy will leave workers tens of thousands worse off and a huge pension bill that we will have to pay through higher taxes,” Mr Linden concluded.
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