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Low Income Earners Hurt By Super Guarantee Hike



A Labor policy to raise the superannuation guarantee to 12 per cent would hit low-income earners the hardest, punish those on the age pension and cost the federal budget $2 billion a year, Grattan Institute analysis shows.

The staged increase, still on ­Coalition books after it was delayed by then prime minister Tony Abbott in 2014, will “help the rich at the expense of the poor”, the ­Institute’s CEO John Daley said. Mr Daley’s analysis, alongside Australian Perspectives fellow Brendan Coates and Grattan ­Institute associate Trent Wiltshire, backs claims by Mr Abbott who said his delay to the legislated increase and keeping the current rate of contributions at 9.5 per cent would be good for workers.

“The bipartisan plan to increase compulsory super contributions to 12 per cent will reduce wages today, do little to boost the retirement incomes of many low-income workers and cost the federal budget billions now and well into the future,” the paper says. “If politicians really want to help low-income earners, the planned ­increases should be scrapped.”

Grattan researchers say low-income earners under the current system will actually get a pay rise when they retire through a mix of superannuation and the age pension while about 70 per cent of all Australians earn a “replacement wage” in retirement.

Research from the Grattan ­Institute shows increasing the super guarantee to 12 per cent “would make future pension payments 2 per cent lower than otherwise”.

“By suppressing the value of pension payments, it could make existing pensioners worse off by up to $460 a year for singles and $640 a year for couples,” the paper says.

The government forgoes revenue through taxation, with more income taxed at the flat 15 per cent super rate instead of the marginal tax rate, costing about $2bn a year.

By Rick Morton

The Australian

30 April 2018

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