"Super Seed" A 250% Boost To Super For Low Income Single Women
Industry Super Australia, in its submission to the Tax Review, has proposed a $5000 “Super Seed” contribution for lower to middle income Australians aged 27–36 to boost retirement savings, particularly for women.
The proposal will make a targeted contribution to those at risk of low super balances and leverage compounding interest to maximum effect.
The superannuation system is meant to have comprehensive coverage. Yet large numbers of Australians at different points in their working life do not have sufficient earnings to attract employer contributions, have them paid at a low level, or cannot maintain continuity of contributions during spells away from work.
“Super Seed” seeks to address these concerns, enabling low income workers to better access the structural benefits of superannuation, such as compound earnings. As a result “Super Seed” substantially increases retirement incomes and total super savings.
The proposal turns on its head the idea of just making catch up contributions later on and instead make contributions at a point where compounding will deliver the biggest bang for buck.
The benefit is targeted at those in the bottom three income deciles which mostly include those working part-time or casually, often when taking a career break to raise children.
For example, for those now aged 25-29 and retiring in 2055, their superannuation balances would be between $72,000 and $168, 000 higher at retirement.
“Super Seeds” greatest impact will be experienced by single females in the lowest three income deciles who will have their super retirement incomes boosted by between 38% and 247%.
This is based on modeling by ISA and Rice Warner Actuaries.
Super Seed will help make up for gaps in contributions caused by low levels of earnings that may not trigger Super Guarantee contributions.
By 2055, with Super Seed in operation, aggregate superannuation balances are expected to be $440 billion higher and it will reduce age pension outlays by $1.7 billion in that year.
Combined with increased earnings taxes on the higher level of savings around half of the long run cost is offset, making it highly affordable in its own right.
Increase to average retirement incomes from superannuation, groups retiring in 2055, selected income deciles
Contact Phil Davey 0414 867 188