Superannuation doesn't seem to help age-old problem
SHOCK and horror met the announcement by the Murdoch press that an increase of the retirement age to 70 by 2029 will be announced in the May budget.
The former Gillard government announced an increase to 67 by 2023 and that too caused widespread conniptions.
Quite rightly commentators asked how likely it was that blue-collar workers in particular would last the distance.
First enacted in 1909, the disability pension morphed into the troubling disability support pension, as we now know it.
Cynics say the aim of the DSP was to get unemployment figures down and create a bridge between Newstart and the aged pension for people who couldn't get work.
A bridge too far as the chronic crook back has gone viral and there are about 600,000 on the DSP.
Significant when you think that the latest seasonally adjusted data is that just under 11.6 million Australians are currently employed.
But what tickles my fancy is that in 1993, there was a tripartite agreement between the Keating government, employers and unions to introduce a 3% superannuation guarantee in lieu of a 3% wage increase as part of the final of four so-called accords.
It was to increase to 12% over time and the theory was that it would help alleviate the cost to future governments of the strong demographic shift to retirees in coming decades: it would substitute for at least a significant part of aged pension outlays.
Assuming the Murdoch press is right, then those born after 1959 will not be able to retire and get the aged pension until they are 70.
Meanwhile the super guarantee will have increased progressively to 12% by 2021-22.
Estimates are that the increase in retirement age to 67 in 2023 will save the government $600 million per year.
But I haven't seen modelling to indicate what sort of savings will come from the growth in super savings going forward.
As at June 30, 2013, there was $1.6 trillion in super savings in Australia.
Surely the fund managers can average 5% growth per annum after tax on that $1.6 trillion, added to by a further 8% after-tax of national salary and wage income, currently estimated to be $575 trillion per annum.
Bob Lamont is director of Corporate Accountants situated at the Night Owl centre in Gladstone.