Why the Superannuation Guarantee helps Guarantee our Future

The rise in the superannuation guarantee debate is still occurring because of interacting and influencing factors on people’s retirement balances. There’s a vast difference between the person who joins a super scheme at 25, retires at 65 and banks their contributions all along to those who have some breaks along the way. Broad sections of the community have such breaks including those who have taken time out of the workplace for childbearing and caring for family members. This opens up the gap between themselves and those who remained fully employed for 40 or more years. The rising gig economy further exacerbates that position, so today superannuation savings are not a ‘one size fits all’.

Why will 2021 be different yet the same? COVID-19 has changed the landscape due to a critical number of factors we now must deal with. From more debt for the government, but at a lower cost to ultra-low interest rates, to the impact this makes on pensioner’s income returns.

It’s clear retirees are going to get less income for their money than before. Even the long-term expectations of returns are reduced now compared to what they were even 12 months ago. So, the super guarantee increase has a lot more work to do than any previous increase. The early release scheme has been a significant drain for younger people in particular and for those with less stable employment – there is that need to replenish those funds.

Then throw in the issue of more retirees using their super to pay off the family home and less people being able to afford home ownership. Why do we have to keep debating what it’s going to take for the next forty years to ensure Australians retire with dignity. It’s critical to have long-term thinking and planning in these issues recognising that any change will take quite a while to work its way through the system.

Sean is Managing Director of McGing Advisory & Actuarial and is currently Deputy Chair of the ASFA Victorian Executive. These views are his own personal views.

Sean and the team at McGing Advisory & Actuarial provide a wide range of Superannuation support services including administration, investment, insurance, risk, governance and actuarial advice.