SYDNEY, Australia – Industry super kicks off a new Superannuation Guarantee campaign, as the Reserve Bank of Australia deliberates into the debate.
The primary group for industry super funds is trying to step up the game, mainly its campaign to convince more in public about the benefits of topping up the superannuation guarantee amid the RBA continuing to weigh in on the same issue.
With its vision, the Industry Super Australia has launched its new advertising campaign specially designed to boost the public’s awareness when it comes to the superannuation guarantee’s increase approved by the legislation. The increase in superannuation guarantee is expected to increase by as much as 12% in time for 2025.
Based on the independent research taken on by UMR, a lot of Australians remain unaware of the current superannuation guarantee rate, much less about its expected 12% increase in the coming years.
According to the ISA, based on the research they’ve done about the issue, there are only about 32% of Australian who are currently aware of the existing super rate, which is at 9.5%. The research also showed that only 11% of the population is aware of the legislated increase of 12% in the SG rate by 2025, ISA said.
Further, the ISA stated that there is around less than 10% of the people who can correctly identify the current SG rate as well as the scheduled increase by 2025.
Moreover, ISA explained that the majority of Australians had grown increasingly worried regarding the ways for them to make ends meet during retirement, the escalating awareness of the impending super is vital in allowing them to maximize their savings accounts as well as their life after retirement.
The superannuation guarantee, or SG, is a contribution required from employers to put into a super fund under your name. The amount for the SG will be based on the employee’s salary or wage; the Australian Government establishes the percentage payable to the super fund by employers. The rate changes over time.
The current SG rate in Australia is at 9.5%, which is set to continue until June 30, 2021. Following that, the SG rate will increase to 10.00% from July 1, 2021, until June 30, 2022. From the period starting July 1, 2022, up to June 30, 2023, the SG rate will increase to 10.50%. The percentage will increase by another 0.50% in the period starting July 1, 2023, up to June 30, 2024, which will then be followed by another half a percent increase starting July 1, 2024, to June 30, 2025.
Meanwhile, starting July 1, 2025, the SG rate will settle at 12% onwards.
Employers are obligated to provide a minimum rate of the ordinary time earnings of each of their eligible employees to a complying super fund or into a retirement savings account. Every employee is eligible for an SG if they are over 18 years old and is earning more than $450 every month, before tax.
Meanwhile, the new SG campaign is set up a notch. It was launched on various media platforms such as broadcast TV, outdoor, radio, social, and online last night. The new campaign from the ISA is also timely amid the recent comments from the Reserve Bank of Australia governor Philip Lowe during the Economics hearing at a House of Representatives Standing Committee last Friday.
The Reserve Bank governor stated that the central bank believes that the increase imposed on compulsory savings, like the SG, won’t negatively affect consumption. He said that any decline in voluntary savings would counterbalance the impact of the increase in the SG in the coming years.
Lowe further stated that taking the effect of the matter in the economy into account, the possible counteract in voluntary savings when the compulsory savings will increase should also be largely considered.
Low explained the idea, stating that if more savings are happening through the super fund, there is most probably fewer voluntary savings, which means the consumption will not change.
Luci Ellis, the assistant governor at the Reserve Bank of Australia, also said that the central bank was predicting that cash wages based on WPI will get significant growth, although it might be a bit slower compared to how much they otherwise would due to the timetabled increase to the SG rate.
Ellis further stated that with the growth in wages of employees remaining relatively low in the historical experience, it is in line with what the governor has been talking about in terms of the risk aversion of the people. One of the things that the RBA knows is that Australians are loss averse, according to Ellis.
Moreover, the assistant RBA governor said that employees are more likely to counterattack a decline in the wage’s growth compared to forgoing what might have been a much quicker growth in wages.
During an interview, Ellis was also asked to clarify the perspective of the central bank by the committee chairperson Tim Wilson. To this, Ellis confirmed that the Reserve Bank is considering the increases to the SG rate are largely obtained from the worker’s wages.
Ellis further explained that the way the bank is looking at it, for the main purpose of their predictions, is that they have looked at the factors in Australia as well as other overseas examples where there are increases in non-cash benefits that employees prefer. He has said that those were not passed through fully.
He said that historically, there is only about 80% non-cash increase in benefits that manages to show up as slightly dimmer wage growth compared to what they would have seen there otherwise.
Bernie Dean, chief executive at the ISA, also commented about the matter. He said that Australians have to know right now that their future is going to be more super.
Dean explained that with the increasing awareness regarding the expected increase to the SG rate will boost a significant amount of confidence for a lot of Australians about their retirement. It will also help them acquire the maximum value from every dollar they earn, Dean stated.
He also said that Australians who continue to worry about their future, or their retirement should stop. Soon, the people will see more funds into their super savings account without then doing a thing, Ellis added.