Superannuation Guarantee Charge - why not 15%

[gronk007]

Hi Everyone,

Obviously we all do what we do with respect to property because we don't want to rely on the government assisting us in our retirement years, and we know that superannuation won't provide for what we need in the future.

That said, it's all the more baffling that the 9% SGC hasn't changed since 2002.

Financial experts and commentators widely consider 15% to be the benchmark, or starting point for a healthy retirement figure, so why didn't the Henry Tax Review go far enough - is it considered too much of a cost imposte on employers? If that is the only reason, then a gradual reduction in income tax payable will soften the blow on that as well....Increase in super levy = decrease in less wage increases because of the tax cuts.

Looking forward to everyone's thoughts.

SGC paid on time is fully deductible as well.

 

[Ausprop]

perhaps it is a recognition that the super industry is largely an inefficient misallocation of resources - and not a small amount either. most people have no idea what overpaid fatcat pushes their money around

 

[gronk007]

Fund Managers have been controlling funds since the beginning of time...no-one else has come across a better way to "parlay" these funds for retirement purposes on a mass scale, other than personal investment strategies.

Most industry funds are pretty lean and efficient these days. Most people say "I'd rather take the income cut and let me decide where I want to put my money...", but people have that choice with superannuation - they can choose any asset class they want (shares, fixed interest, cash, property), any risk profile they want (geared, non-geared), and any market they want (small cap, overseas, emerging, Australian etc).

The current amount of superannuation under control in Australia is a tick over $1trillion dollars. Even allowing for 5% growth, that is $50bn a year growth. Given the boomers retiring soon, and the need for govt assistance the next 30-40 years, $50bn a year over a medium horizon is a lot of money the govt DOESN'T need to be handing out to people.

 

[Ausprop]

Even allowing for 5% growth, that is $50bn a year growth.

what about loss years?

 

[gronk007]

I was referring to 5% "over a medium horizon" - so that figure's smoothed over good and bad years...5% over a period of an investment cycle is still very conservative.

 

[Strannik]

why would you want more of your income be directed into super?

and if you do so, why not just roll extra 9% yourself?

 

[redwing]

what about loss years?

Then they change the name of the fund

What loss years

 

[weg]

why would you want more of your income be directed into super?

and if you do so, why not just roll extra 9% yourself?

The average worker would love 15% providing someone else pays.

I think 9% is ample from an employer. Over and above that should be in lieu of pay rises if employees vote that this is part of their award, otherwise they should pay this themselves.

I read an article recently where they surveyed people, most of whom had very little super, and a large percentage had hoped to have enough to travel and pay off debt in retirement using these funds, leaving the tax payers to then pick up the pension tab.

Can they even do this .

 

[gronk007]

Strannik - the super doesn't come out of our incomes, it's on top of it. I don't lose anything by having more super contributed to my fund....but if I was going to contribute more (I do, although alot of people can't), it comes out pre-tax, so monies sent to your super fund are taxed at an entry point of 15% as opposed to my/your marginal rate of tax.

Weg - there are always going to be a group of people who require government assistance for whatever reason. The people who require government assistance are themselves taxpayers

Anyone who thinks 9% over 30 years is going to help them wind down debt, and going "travelling" are going to be in a world of hurt

 

[Player]

..............Anyone who thinks 9% over 30 years is going to help them wind down debt, and going "travelling" are going to be in a world of hurt

Yet most of those (in the 95 percenter cohort) absolve all responsibility for their financial future by handing even the employer sponsored reins over to the major insto funds, who are either inept, fee sucking leeches or both.

gronk007, as you indicated in your opening post, I believe that upping the ante to 15 % will hurt employers and costs jobs.....feedback to the welfare loop that tax payers will fund anyway.

No easy answer to this, however if some of the majority took control they would be able to steer their own ship away from the rocks. Amount of money being earned/saved is irrelevant. Everyone has to start somewhere.

How we anything is usually how we do everything.

 

[Strannik]

Strannik - the super doesn't come out of our incomes, it's on top of it.

sure does. my contract clearly says that i get X amount including super.
so if the laws were to change, it would mean reduction in disposable income

 

[Mr. Fabulous]

Most industry funds are pretty lean and efficient these days.

You clearly don't deal with industry funds, do you.

 

[VYBerlinaV8]

Strannik - the super doesn't come out of our incomes, it's on top of it. I don't lose anything by having more super contributed to my fund....

...but I do. Like many professionals, I negotiate a package, and my superannuation is deducted from that. Requiring a higher compulsory super contribution will reduce the income I have to invest. Not cool for me at all.

 

[marg4000]

The original plan for super as devised by Keating was for a total of 15% - 9% to be provided by the employer then a compulsory 6% contribution by the worker. The 9% was easy for labor to implement as a surcharge on business, partly offset by foregone wage increases.

The compulsory 6% worker contribution was a trickier proposition (it was intended to be introduced in two stages of 3% each) as it was unpopular with the labor party followers and died a quiet death.

Hence we are left with 9% employer contribution. It is up to the individual as to whether they contribute or not.
Marg

 

[gronk007]

You clearly don't deal with industry funds, do you.

Um, yeah, I do....

 

[gronk007]

sure does. my contract clearly says that i get X amount including super.
so if the laws were to change, it would mean reduction in disposable income

Any increase, for simplicity sakes say 1%, hypothetically next year will not mean you get 1% less in your pay packet from your employer.

The 1% increase is a statutory cost required to be paid by the employer.

I'll give another example, if payroll tax in your state went up 0.5% next financial year, do you think you're going to take a hit in your pre-tax or after-income?

 

[Mr. Fabulous]

Um, yeah, I do....

Care to provide some examples? I have never once come across an industry fund that could be described as 'lean and efficient'.

 

[Strannik]

Any increase, for simplicity sakes say 1%, hypothetically next year will not mean you get 1% less in your pay packet from your employer.

The 1% increase is a statutory cost required to be paid by the employer.

I'll give another example, if payroll tax in your state went up 0.5% next financial year, do you think you're going to take a hit in your pre-tax or after-income?

payroll tax is different
my package doesn't say that it includes payroll tax.

the cost for 1% increase will be paid by employer out of my money.

most likely it will mean that my pay rise that year will be where that extra 1% comes from

 

[Corey Batt]

my partners yearly salary is calculated as x with super being inclusive. An increase in the super percentage would reduce after tax pay.

I however am paid x plus super.

Weird eh, either way I'd rather not have to pay any super at all, le sigh.

There should be a policy introduced wherein super can only be used as an income stream, however if taken lump sum then what ever proportion taken as a lump sum will be reduce any future pension allocation by an equal amount. E.G if an individual had 1 million at retirement and accessed 500k, then any future pension could only be received at 50%. This would limit any spending spree and future reliance on pensions for income. This would coerce the individual to live within the means of their super allocations.

 

[Mr. Fabulous]

either way I'd rather not have to pay any super at all, le sigh.

This fo shizzle mah nizzle. Dizzle dizzle!