Australians can look forward to a bigger nest egg as super guarantee rises to 12%
From 1 July, employers' minimum required contribution to employees' superannuation accounts will rise from 11.5% to 12%.
It is the latest and last in a series of incremental increases from 9% over more than a decade since they were legislated by the Rudd-Gillard Labor government in 2012.
With the latest bump, a 30-year-old earning $60,000 would have an extra $20,000 in super by retirement, according to the Association of Superannuation Funds of Australia.
It will add about $300 each year to the superannuation of a worker on a $60,000 salary, or $500 for someone on a $100,000 salary.
'The system foundations are cemented for young, working people to have a comfortable retirement,' the ASFA chief executive, Mary Delahunty, said.
'It's a moment all Australians should be proud of.'
Sign up for Guardian Australia's breaking news email
The association said the cost of a comfortable retirement had increased 1.6% in the past year, while the cost of a modest retirement rose 1.7%.
A 'comfortable' retirement includes top-level health insurance, a reasonable car and leisure activities.
The cost of either outcome was increasing slower than Australia's current 2.4% headline inflation but retiree budgets remained under pressure from rising food, energy and health costs.
Couples on average need $73,900 annually for a comfortable retirement, while most singles require $52,300 a year, ASFA says.
For a modest retirement covering the basics, couples needed $48,200 each year, singles $33,400, or for renting couples, $64,250, and $46,660 each year for singles who rent.
The figures underlined the importance of increasing Australia's housing stock, Delahunty said.
'They also illustrate how super can be the difference between hardship and stability later in life, especially for renters.'
For some workers, the extra contribution would come from their existing pay package, according to CPA Australia's superannuation lead, Richard Webb.
'It's a good idea to check with your employer to see how they view the changes and what it means for you,' he said.
Sign up to Breaking News Australia
Get the most important news as it breaks
after newsletter promotion
Workers on contracts with a total remuneration package could see a slight drop in their take-home pay, while those on award or enterprise agreements would likely receive the contribution on top of their current pay.
When compulsory superannuation was introduced in 1992 – in part to reduce government spending on the age pension – only one in 10 Australian retirees listed super as a source of income.
Nine in 10 people between 30 and 50 now have super.
Government spending on the age pension was projected to fall from 2.3% of gross domestic product in 2020 to 2.0% by 2062-63, despite a doubling of the over-65 population and a trebling of over-85s over the same period.
However, the super guarantee increase would not help those who missed out on paid work for extended periods, the Super Consumers Australia chief executive, Xavier O'Halloran, said.
'(For) people who have caring responsibilities or who have been locked out of the unaffordable housing market … increasing SG further won't address those inequalities,' he said.
O'Halloran said there was more that could be done to support people struggling in retirement, when a significant portion of their autumnal years' savings were made.
'Right now, there are no minimum standards for retirement products like there are for MySuper,' he said.
'There is also no performance testing of retirement products, so super funds can still sell poor products.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
34 minutes ago
- The Independent
State pension age review needed to ensure system ‘affordable'
Chancellor Rachel Reeves has said a review into raising the state pension age is needed to ensure the system is 'sustainable and affordable'. The Government review is due to report in March 2029 and Ms Reeves said it was 'right' to look at the age at which people can receive the state pension as life expectancy increases. The state pension age is currently 66, rising to 67 by 2028 and the Government is legally required to periodically review the age. The Chancellor told reporters: 'We have just commissioned a review of pensions adequacy, so whether people are saving enough for retirement, and also the state pension age. 'As life expectancy increases it is right to look at the state pension age to ensure that the state pension is sustainable and affordable for generations to come. 'That's why we have asked a very experienced set of experts to look at all the evidence.' The review was announced by the Department for Work and Pensions on Monday and will involve an independent report, led by Dr Suzy Morrissey, on specified factors relevant to the Review of State Pension Age along with the Government Actuary's Department's examination of the latest life expectancy projections data. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: 'There will be many factors that need to be assessed during this review of the state pension age. 'One of the most important will be healthy life expectancy which according to the latest data hovers in the early 60s. 'This means the reality is that many people will face real difficulties in continuing to work until their mid-to-late 60s and could face a sizeable income gap while they wait to receive their state pension.' Rachel Vahey, head of public policy at AJ Bell, said: 'An ageing population places an increasing burden on taxpayers, with state pension costs rising and fewer working-age taxpayers to cover the cost. 'Future governments will hope that an improved economy and growing tax receipts will help alleviate some of the pressure. But that can't be guaranteed and there needs to a be a credible plan for maintaining affordability.'
Reuters
2 hours ago
- Reuters
Australia's Insignia shares rise on $2.2 billion CC Capital takeover deal
July 22 (Reuters) - Shares of Insignia Financial ( opens new tab closed 12.2% higher on Tuesday after the Australian company agreed to a A$3.3 billion ($2.15 billion) takeover by investment manager CC Capital Partners, ending an almost eight-month pursuit. The agreed A$4.80 per-share price is below the A$5 bid CC Capital raised in March to match a rival offer from U.S.-based Bain Capital. Shares of Insignia, the third-largest player in Australia's superannuation sector, closed at A$4.41, with the gains outpacing the 0.1% rise in Australia's S&P/ASX200 index. The New York-based CC Capital said on Tuesday One Investment Management, a global alternative investment fund, would be a co-equity investor in its bid for Insignia. CC Capital did not outline the size of OneIM's contribution to the deal. Bain Capital withdrew its A$3.34 billion offer in May, leaving CC Capital as the sole bidder. The lower price followed CC Capital's completion of due diligence on the Australian firm. Insignia said on Tuesday it had received eight bids from Bain, CC Capital and Brookfield Capital Partners since last December. The Australian company's board supported the lower offer and recommended investors vote in favour of the deal, which will require 75% support from shareholders to proceed. Foreign companies are competing to gain access to Australia's wealth management and retirement savings industry. Insignia, which also provides financial planning and investment management services, said funds under administration climbed by A$8.5 billion, or 2.6%, to A$330.3 billion in the quarter ended June 30. Both Bain Capital and CC Capital Partners were granted an additional four weeks in April to finalise their bids after requesting extended exclusivity periods to complete debt funding and due diligence. Insigna said it expected the deal to be finalised in the first half of 2026, pending approval from Australia's Foreign Investment Review Board (FIRB), competition and banking regulators. ($1 = 1.5337 Australian dollars)
Daily Mail
2 hours ago
- Daily Mail
Inside the Labor Party's bold push to increase taxes on property investors: 'Government now has a mandate to rectify inequity'
Labor Party activists are pushing to scrap the discount on capital gains tax when selling investment properties, despite Anthony Albanese ruling out such changes when in Opposition. Former Labor leader Bill Shorten lost the 2016 and 2019 elections with a plan to halve the 50 per cent capital gains tax discount to 25 per cent. The lesson of those election defeats led Albanese to rule out tinkering with capital gains taxes after he took over as Labor leader, and he went on to win the 2022 election and was resoundingly re-elected in May. But now a grassroots organisation within the Prime Minister's own party – Labor for Housing – wants the 50 per cent capital gains tax discount scrapped entirely, not just diluted. That meant someone who made a $100,000 capital gain on their investment property would be taxed on the entire increase, not just $50,000 of it. Labor for Housing co-convener Julijana Todorovic told Daily Mail Australia the 50 per cent capital gains tax discount for selling residential properties introduced in September 1999, needed to be dismantled. 'We think it should be removed entirely, so not immediately,' she said. 'Property should not be an investment for which you can claim the discount.' Ms Todorovic, a land rights lawyer, said the Albanese government should change policy before the next election campaign. 'Our view is that the Labor government now has a mandate to rectify inequity in Australian society,' she said. 'While it's clear from the election results that we can't be too radical, we must do something to stem the flow of generational inequity.' She argued the 50 per cent capital gains tax discount should be grandfathered for existing investors but scrapped for future purchases - a position the Greens took to the May election. 'We are proposing that residential property is removed as a category for which the discount can be claimed,' Ms Todorovic said. 'But we're proposing that this change is grandfathered to a certain date – so if people have structured their finances based on the discount, then they will have time to restructure – they won't be left high and dry.' Labor for Housing argued that scrapping the discount for properties would encourage investors to invest in technology and businesses, rather than putting all their funds into real estate and thereby driving up the country's massive house prices. 'Australia's capital resources have become landlocked by a CGT discount on property,' it said in a submission to the government's August Economic Reform Roundtable. 'As Australia electrifies, transitions to renewables and increases our data capacity, businesses are struggling to find adequate capital. 'By incentivising investment in the productive powers of the market, the government can increase the circular flow of capital in the economy, creating jobs and additional economic activity.' The Greens went to the last election with a plan to scrap the 50 per cent capital gains tax discount for future purchases of investment properties, and grandfather it to one property for those who already owned an investment property. While Labor has a landslide majority in the House of Representatives, it just needs the Greens to get its legislation passed in the Senate without the need to win the support of other crossbenchers. The Labor-aligned McKell Institute has called for the federal government to reduce the 50 per cent capital gains tax discount to 35 per cent for existing investment properties with a backyard. This means $65,000 of a $100,000 capital gain would be taxed, up from $50,000 now. But it has also called for the 50 per cent capital gains tax discount to be increased to 70 per cent for newly-built apartments, arguing this kind of policy would boost housing supply and encourage more off-the-plan unit developments. That means only $30,000 of a $100,000 capital gain would be taxed - and force more Aussies into apartments rather than homes with a backyard as Labor aims to build 1.2million homes over five years. The McKell Institute's Harnessing Aspiration report argued the existing 50 per cent capital gains tax discount encouraged investor speculators to buy up houses at a time when there is a shortage. 'There is a unique incentive for investors to speculate on existing detached houses rather than non-existing off-the -plan attached dwellings or established attached dwellings,' he said. 'The blanket tax treatment of each of these asset types means an investor is much more attracted to high-growth existing detached dwellings than moderate-growth attached dwellings, especially new builds.' The average, full-time worker earning $102,742 a year is priced out of buying the median-priced house in every state and territory capital city except Darwin. Ms Todorovic said Labor for Housing's call to scrap the 50 per cent capital gains tax discount was not about stopping property speculation, but merely to have it treated the same way as other forms of speculative investment. 'It won't – this isn't the tool to correct speculation, this is about removing incentives which preference land above other more productive investments,' she said.
