Young and low-income workers are the big winners in super boost says ISA

MORE THAN 6.7 million Australians will benefit from a boost to their nest egg from July as the super rate increases to 10 percent, with young workers and low to middle-income earners the big winners acording to Insdustry Super Australia.

From July 1 an extra $233 a year will flow into the super accounts of the average worker. This super boost may be small, but it will make a big difference at retirement – with a 30-year-old on the median wage expected to have an extra $19,000 at retirement, a couple will have an extra $38,000, according to  Industry Super Australia chief executive Bernie Dean.

In total Australians will get an extra $1.5 billion paid in super in the next 12 months, he said.

"Even though the increases are only small now, they'll add up to make huge positive difference for millions of Australians when they retire," Mr Dean said. “These increases will give women more financial independence and that means a better shot at a dignified life in retirement, not one marked by poverty.

“Young people will be the big winners from these increases and help those that raided their super last year, during the downturn, make up some of the lost ground. “This is the first of a number of increases the government has promised and locked in law for the coming few years.” 

Half of the extra super payments – about $784 million will go to those under 40 – and more people in their 20s will get a super boost than any other age bracket (see tables below). The extra contributions will help young workers recoup the savings they lost after they were encouraged to raid their super to support themselves through the Coronavirus downturn.

Industry Super Australia analysis of tax file data shows that more women than men will receive the July 1 super boost – 3.41 million women compared with 3.36 million men.

Around 63 percent of those who will benefit from the Superannuation Guaranteee (SG) increase are on wages less than $70,000 – many of these 4.3 million workers are in line for a five-figure boost to their retirement savings – which will improve their quality of life at retirement dramatically.   

The super rate is legislated to rise from 9.5 percent to 12 percent by 2025 by annual 0.5 percent increases. In the Budget this year the Federal Government re-committed to its election pledge to stick to the legislated schedule. This commitment to 12 percent super will deliver an extra $85,000 to the typical workers’ retirement savings.

Mr Dean said the increase to 12 percent will also:  Add $170,000 to the retirement nest egg of the average 30-year-old couple; save $33 billion in Age Pension costs over coming decades; Inoculate retirees from future adverse changes to the Age Pension; Add $12 billion to Australia’s GDP, create 10,000 jobs and increase real wages, according to research from independent consultants ACIL Allen.  

The SG is a critical response to the ageing population and improves retirement incomes of working people in a fiscally sustainable manner. Although still maturing, annual superannuation retirement benefit payments are already double age pension expenditures.

 Table 1: Super guarantee increase winners by state

State	People	Average payment per person	State total ($m)
NSW	2,199,700	$246	$541
Victoria	1,790,400	$228	$409
Queensland	1,259,150	$222	$279
Western Australia	755,000	$244	$185
South Australia	467,950	$208	$97
Tasmania	141,300	$194	$27
ACT	85,550	$230	$20
Northern Territory	69,100	$257	$18
Australia	6,768,150	$233	$1,576

Source:  ISA analysis of 2018-19 2% tax file.

 

Table 2: Super guarantee increase winners by income

Income	Numbers of people	% of SG increase recipients by income band	% of wage band who are SG increase recipients
$5401-$24,999	996,350	15%	49%
$25,000- $34,999	668,850	10%	60%
$35,000- $54,999	1,584,250	23%	64%
$55,000- $69,999	1,047,700	15%	65%
$70,000- $84,999	770,550	11%	63%
$85,000- $99,999	538,800	8%	60%
$100,000- $149,999	817,800	12%	59%
$150,000- $199,999	235,800	3%	61%
$200,000 over	108,050	2%	44%
Total	6,768,150	100%	57%

Source:  ISA analysis of 2018-19 2% tax file.

 Table 3: Super guarantee increase winners by age

Age	Total number of people	% of SG increase receipents by age bracket	% among wage earners in age bracket
20-29	1,822,700	27%	64%
30-39	1,813,200	27%	61%
40-49	1,386,450	20%	59%
50-59	1,128,800	17%	55%
60-69	547,500	8%	52%
70+	69,500	1%	43%
All	6,768,150	100%	57%

Source:  ISA analysis of 2018-19 2% tax file.

 

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