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Be alarmed: they’re coming for your Super

Oi! Hands off our Super

Fair dinkum.

Have you heard anything crazier than recent calls to both delay increases to compulsory superannuation, and to exempt the employers of low-income earners from that obligation?

Okay, I am talking about Canberra. So it is possible there’s been something crazier at some point.

But at the very least, this one gets a podium finish.

I mean, seriously. What the hell are these people thinking?

Of course, the answer is, in most cases, they’re not. Many, perhaps most, of those who would advocate for either or both of these changes are so blinded by ideology, base politics (or both!) that we can — and should — just outright discount their views.

It’s such a silly notion that I actually can’t believe I have to write about it.

But here we are.

Let’s take them in turn, shall we?

Some people, somehow, have managed to convince themselves that delaying the staged increase in Super, from 9.5% to 12% of wages, will be better for the economy. That’s despite the increase not actually taking effect until mid-2021, then increasing by a measly 0.5% of the wages bill for each of the following four years.

So, nothing — at all — for 24 months, then a skerrick thereafter. Even if a company’s entire cost base was wages (a fantasy), that business’ costs would increase at half of one per cent, per year, over four years, starting in 2021.

And the opponents of that increase would have you believe that it’s unaffordable!

Seriously, if your business can’t afford a less-than-one-per-cent increase on just one element of its cost base, your business has bigger problems than superannuation policy.

And remember, this doesn’t exist in a vacuum. I was on the Sunrise program over the weekend, talking about how far the average 30-something and 40-something is from the ideal Super balance already.

And if there’s not enough Super, guess what — the taxpayer foots the bill…

…Yes, the same companies and shareholders who are worried about a 0.5% yearly increase in compulsory Super over four years!

The Super issue is infuriatingly simple: As a society, it just makes plain bloody financial sense that a few pennies spent now will save us dollars in 10, 20 and 30 years’ time.

Those opposing the increase are sowing the seeds of future costs, sticking their heads in the proverbial sand. 

No responsible society, or government, which has the power to act now, and avoid a financial burden later, should be even considering such a move.

Speaking of ‘later’, can you believe that some people are saying low-income jobs should be exempt from Super contributions.

Again, this is such a self-evidently dumb idea that I shouldn’t even have to waste time and effort rebutting it. 

But — again — here we are.

Let me ask you a simple question:

If I broke up the workforce into high-, middle- and low-income workers, and asked you which group was least likely to earn enough to save (extra) for their own retirement, which group would you choose?

And that group, by definition, would need the most help in providing for their retirement needs, right?

By, say, a compulsory scheme, garnishing a proportion of their wages, to be put into a retirement savings account.

And you’d call it Superannuation, right?

I don’t know about you, but I think I’ve just made the very simple case for Super, especially for low income earners, in less than 100 words.

Frankly, if low-income earners aren’t earning enough take-home pay, there are much better ways of solving the problem, other than raiding their retirements.

Super is not a magic pudding. It’s not a toy for ideologues or politicians to plunder, whenever they want to solve a short-term problem with someone else’s money.

Super is far from perfect. Fees are too high, and too many are on the gravy train. There is too much leverage being used. And it’s not sufficiently understood by many.

But being compulsory for low-income earners, and very slowly increased to 12%, by 2025, just aren’t among them.

Super is one of Australia’s greatest shining policy lights.

Pollies, wonks and ideologues, here’s a very simple message from the rest of us:

Leave our Super alone!

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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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