Labor has flagged it will oppose Government superannuation reforms that could deliver an 86 per cent improvement to a person’s super balance over their lifetime but last night re-announced a paltry measure that would be lucky to give people an extra $3000 in their super fund, Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said today.
“The Government’s super co-contribution could add $106,000 to a low-income earner’s real retirement balance over a 30 year working life – that’s an 86 per cent improvement on their final balance and represents a 112 per cent replacement rate for someone on $25,000,” Senator Coonan said.
“Labor’s proposal to stick with a two per cent cut to the contributions tax would only add $3000 in real terms to a worker’s super account over their working life.
“Labor also fails to understand that retirees are more than 100 per cent compensated by the pension offset for every dollar of contributions tax paid.
“Therefore a cut in contributions tax would mean a cut in the compensating pension offset resulting in many retirees being worse off.
“Time and time again Labor has exposed a fundamental lack of understanding of how best to approach the issue of adequate super savings in retirement. The best approach is to provide incentives for people to save.
“The Government has committed to helping low and middle income earners boost their super balance by extending the co-contribution to those earning $58,000 and by increasing the co-contribution to $1.50 for every dollar saved up to $1000 a year.
“Even for a baby-boomer with only 15 years left in the workforce, the super co-contribution would improve their real super fund balance by 11 per cent – for a person on $40,000 that is an increase of $18,000 - while Labor’s plan would only provide an improvement of $1700 over the same time frame.
“The Government is also reducing the disincentive for those who can afford to save to do so by cutting the superannuation surcharge from 14.5 per cent to 7.5 per cent.
“The Opposition would deny Australian workers the opportunity to take advantage of these incentives but will not provide any meaningful alternative. Labor is happy to continue with opposition for opposition’s sake rather than helping Australians boost their retirement savings.”
Attachment:
Scenario 1 – the new starter
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A worker with a current income for co-contribution purposes of $25,000 makes the minimum level of member contributions required to receive the maximum Government co-contribution over a 30 year working life. The worker’s real accumulation balance is projected to increase by $106,000.
- This represents an 86 per cent improvement compared to if the worker relied solely on superannuation guarantee contributions.
Labor
- The new-starter would only receive a projected $3000 real improvement under Labor’s proposal for a two per cent reduction in contributions tax.
Scenario 2 – the average worker
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• A worker with a current income for co-contribution purposes of $36,000 (approximately median earnings) makes the minimum level of member contributions required to receive the maximum Government co-contribution over a 30 year working life. The worker’s real accumulation balance is projected to increase by $51,000.
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o This represents a 28 per cent improvement compared to if the worker relied solely on superannuation guarantee contributions.
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Labor
- Under Labor’s proposal for a two per cent cut in contributions tax the average worker will receive a projected $4500 real improvement in their retirement income.
Scenario 3 – the baby-boomer
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A baby-boomer with a current superannuation balance of $50,000 and income for co-contribution purposes of $40,000 makes the minimum level of member contributions required to receive the maximum Government co-contribution for the 15 years left until retirement. The baby-boomer’s real accumulation balance is projected to increase by $18,000.
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This is an 11 per cent improvement compared to if the baby-boomer relied solely on superannuation guarantee contributions.
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Labor:
- Under Labor’s proposal for a two per cent cut in contributions tax,
the baby-boomer would receive a real increase of $1700.