An " Unpersuasive " Argument !

The basic thinking behind compulsory superannuation was the need to stem the tide of red ink that age pensions will eventually inflict on the economy.   The idea was based on both the employer and the employee contributing to each workers superannuation pot with the objective of cumulative interest reaching an achievable self funded retirement.

Now the government is considering freeing up that requirement by allowing the lowly paid to opt out of superannuation entirely - and virtually supplement their meagre earnings by what would amount to a sixty dollar a week pay increase for those earning less than $ 37,000 a year.

The rationale seems to be that the lowly paid will never accumulate a pension pot capable of sustaining them in old age and therefore the aged pension is a necessity that will need to be paid to a section of the community.  By returning that 9.5% superannuation charge to low paid workers pay packets each pay day they will be able to increase their standard of living and take pressure off the demand for pay increases.

This is a very unpersuasive  argument.  It virtually condems the lowly paid to be entirely reliant on the aged pension during their retirement years and this will be a form of poverty in comparison with others who have at least a small superannuation return to supplement the basic pension.  The age pension rules allow a pensioner to have reasonable assets or even hold a part time job without affecting the pension level.  There is a measurable benefit accruing from superannuation contributions even when the return only amounts to a small pension supplement during the retirement years.

It is doubtful that opting out of superannuation and delivering an extra sixty dollars a week to the lowly paid will ease pressure on basic pay levels.  The cost of many items is dictated by ability to pay and prices march in lockstep with that ability.  That extra sixty dollars a week will be quickly absorbed and in some cases may even result in pay rates decreasing.  There is mounting evidence that many casual jobs fail to deliver the level of pay that is legally required.

Unfortunately, compulsory superannuation was implemented badly and those constantly changing jobs fell through the net.  Huge amounts of money lay dormant in various funds simply because identification of the correct owner failed. Much of this is untraceable and if the scheme is to continue it badly needs revision.  To walk away from what was a promising idea is to simply abandon many to a miserable old age.

The government seems to accept that it will be necessary to fund the age pension into the future for at least the low paid of our society.  Initially, pensions were set at what some saw as the " survival " level and did not allow for much in the way of luxuries.  They have certainly improved, but any person living on the base pension is constrained to a frugal way of life.  An unexpected expense can be debilitating.

Under the present compulsory superannuation saving requirement the lowly paid may not accumulate a self funded retirement pot but they will certainly have sufficient to provide a supplement to move them above just the basic age pension.   If that is abandoned now it is certain that it will ensure that future governments will come under unrelenting pressure to increase basic pension rates that may be unsustainable !