Australia has got superannuation policy wrong. 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. If politicians really want to help low-income earners, the planned increases should be scrapped.
The Super Guarantee works by forcing people to save while they are working so they’ll have more to spend when they retire. But it’s no magic pudding. As the Henry Tax Review and others have noted, higher compulsory super contributions are ultimately funded by lower wages, which means lower living standards for workers today.