You'd have to be living under a rock not to see the recent headlines about the Federal Government proposing changes to the Australian superannuation system.
While not all Australians are interested in politics, it's safe to say that nearly all of us are interested in any changes to our retirement plans.
So, what exactly is the government looking at changing and what impact could it have on our retirement savings?
Why some people want to change the super system
As it stands at the moment, most Aussie employers are required to pay 9.5% per annum of a worker's annual salary into their superannuation fund, in what is known as the Superannuation Guarantee.
While the 9.5% p.a. payment has been standard for decades, the Government has a planned increase in the Guarantee towards 12% p.a. by the FY2026 in order to increase self-funded retirement and reduce its aged care burden.
While the Australian Super Fund Association reports that the average Australian's retirement balance at the age of 60–64 is $270,000 for men and $157,060 for women, the increasingly "top-heavy" population means the pension obligations for the Federal Government are set to surge higher in years to come.
However, by increasing the Superannuation Guarantee to 12% p.a., advocates say that this will increase balances closer to what is needed for full financial independence in the decades ahead.
On the other hand, some members of the Coalition have argued against the Government's plan to increase the Superannuation Guarantee towards 12% p.a., believing that it will unfairly hurt real wages for workers.
According to research from the Grattan Institute, the planned increases could strip back $20 billion per year in wages once it is fully implemented in FY2026, given wages may remain unchanged (or head south) due to the higher cost to employers.
Is superannuation still a good investment vehicle?
While there are Members of Parliament advocating for both sides, the important thing to remember about superannuation is that it is inherently individual.
As debate rages in the Australian Parliament (and the media), a higher super balance could give you the chance to invest in the likes of Afterpay Touch Group Ltd (ASX: APT) in a tax-advantaged vehicle – boosting your real returns higher.
While Afterpay is still to report its results in August, I think the company can deliver another outperformance result as its United States expansion matures and the retail conditions manage to just hold steady here in Australia.
