The " Retirement " Conundrum !

A huge number of Australians are approaching the age when it is usual to retire without  a sufficient nest egg to cover the years that will be without a weekly pay packet.  The best they can look forward to is the age pension and that is only sufficient to fund an austere lifestyle.

A long time ago superannuation was supposed to cover all when the government imposed a  compulsory " Superannuation Guarantee " (SG) policy which required all employers to contribute a percentage of their employees wages into a superannuation fund for their retirement.  It was made clear this was entirely different from their take home pay, which would not be reduced when SG commenced.

That SG employer contribution is presently set at 9.5% of the weekly wage and there are moves to increase it to 12% in 2025.  Despite this employer contribution, a lot of people are falling by the wayside and there is concern that extending the SG will further slow wage growth which is not increasing in tandem with living costs.

It is one of the mysteries of economics why wages are stagnant.  Most industry  segments have increased profitability and the unemployment figure remains low.  We actually have job vacancies for qualified people that are not being filled and yet wages are holding at a static level.

Research by the Grattan Institute last year found that even though employers are required to pay SG  on top of workers salaries, contributions are more likely to come out of employees pay packets.  It could well be that SG is the factor holding down what should be traditional wage increases geared to economic activity.

The initial thinking when SG was being considered was for the employee and the employer to jointly fund this retirement nest egg.  The employers contribution was mandated by an act of parliament, but any employee contributions was voluntary.   It is quite clear that a big percentage of the workforce made no effort to fund their side of the retirement issue.

It is also clear that SG does not cover all employment types. The modelling does not take into account casual work, gender or time out of the workforce.   It is an initiative that suits some, but not all.   It completely ignores what is termed the " Gig " economy and undervalues women who usually take time out to raise children and receive less than the male wage.

Some economists view that increase of SG to twelve percent with trepidation.  There is the fear that many employers will consider it a wage rise in their mindset and further retard real wage growth which is stifling the economy.  There is every expectation that this SG increment will be regarded with hostility by employers.

SG was a good idea intended to level the playing field.  It extended a retirement fund to all, but it came at the employers expense.  Perhaps the notion that all members of society are entitled to reach retirement age with sufficient funds to avoid the pension is an illusion.

A lot of thinking is based on the fact that we humans are living longer, but it is not ideal if a worker remains relatively poor all their working life in the expectation of a big superannuation payout - and dies shortly thereafter.   Perhaps a good time to have a long and searching look at this whole SG question !