The federal government’s superannuation freeze has cost workers thousands in retirement savings and failed to stimulate wage growth, according to a new report.
The federal government’s decision to freeze the superannuation guarantee (SG) rate at 9.5 per cent in 2014 has cost the average worker $4,332 in forgone super over the past five years, according to the Super Freeze: What You’ve Lost report released by Per Capita.
The loss of super is compounded by stagnating wages and rising costs of living which have seen the average worker’s take-home pay decline by more than $1000 in real terms since 2014.
A government review is currently underway to determine if the SG rate should be increased to 12 per cent by 2025, as is currently legislated.
When the Abbott government initially froze the SG rate in 2014 (which was then set to reach 12 per cent by July 2019) it argued the move would lead to increases in take-home pay – rather than wage increases being absorbed into higher superannuation payments.
However, according to the Per Capita report, workers have not seen this promised wage growth.
“Contrary to the then Prime Minister’s promises in 2014 that the money saved would be deposited in workers’ pockets, it has been pocketed by their employers instead,” the report states.
“At a time when income inequality is growing, when Australia has amongst the highest levels of pensioner poverty in the OECD, and real wages are being outstripped by massive price increases in essential services such as child care, electricity and housing, a debate about whether and to what extent increases in the compulsory rate of retirement savings will come at the extent of (non-existent) wage growth is both an insult and a waste of time for Australian workers.”
The Australian Council of Trade Unions (ACTU) has made a submission to the government review with 23 recommendations, including a call for the SG rate to be increased to 15 per cent.
The ACTU proposal would also see women workers receive an accelerated enhancement to SG in a bid to address the 47 per cent super gap, which is forcing many women into retirement poverty.
ACTU Assistant Secretary Scott Connolly said the retirement income system must be urgently reformed to improve the standard of living of retired workers today, and to improve them into the future.
“The superannuation guarantee must be increased to 15 per cent as soon as possible to ensure a dignified retirement for all workers.
“Women face retirement today with far less super than men. The inequalities which have been baked into the system must be removed.
“Our superannuation system is one of the labour movement’s proudest achievements. It is a world-class vehicle for workers to retire with dignity, but it is not finished. The superannuation system needs to be strengthened and rebuilt for a modern Australia, and workers’ capital should be used to improve the lives of those working while generating returns for those who are retired.”
Click here to read Per Capita’s Super Freeze: What You’ve Lost report.
Click here to read the ACTU’s Living Well After Work submission to the government’s Retirement Income Review.