A third of Australians will receive enough superannuation to ensure a comfortable retirement. Photo / Supplied
A third of Australians will receive enough superannuation to ensure a comfortable retirement. Photo / Supplied
Australia is preparing to boost the level of compulsory employer-funded superannuation contributions to help close the retirement income gap for its surging grey population.
The graduated rise from the present 9 per cent to 12 per cent by 2019-20 is predicted to add A$500 billion ($630 billion) to the supersavings pool by 2035, pumping the present A$1.23 trillion - roughly equivalent to Australia's gross domestic product - to about A$6 trillion.
In the 20 years since Labor introduced the original 3 per cent contribution as a trade-off for a prices and incomes accord with the unions to end crippling disputes, the compulsory scheme has become entrenched as a key social and economic tool.
Originally opposed by companies warning they would be sent to the wall, the scheme's massive savings have been matched by productivity gains and a vast source of finance.
As well as easing the economic pain of an ageing population, a report by the Allen Consulting Group for the Association of Superannuation Funds found the super pool was central to Australia's survival through the global financial crisis.
It said super funds were one of the main sources of equity financing for companies through private placements when debt financing became unavailable or unaffordable for Australian companies, and helped companies lower risk.
But funds remain vulnerable to global crises and increasing longevity is biting into the scheme's benefits.
At present levels, one-third of Australians will receive the 70 per cent of working incomes regarded as necessary for a comfortable retirement.
Tower Investments chief executive Sam Stubbs said if New Zealand had the right superannuation policy, it could catch up to the savings held by Australia.
He said people consistently underestimate the power of compounding savings.
