Mercer Australia has joined the growing chorus of commentators calling for policymakers to consider whether the superannuation system remains fit for purpose, after revealing that 9 per cent of the workforce is missing out on super contributions.
Mercer has reviewed tax office data and found that 935,350 Australian workers are missing out on superannuation savings, some because their employers are not making contributions on their behalf and some because they are self-employed and not contributing. That is one in 11 workers.
Of the 935,350, 43 per cent are salaried workers, eligible for superannuation guarantee payments.
Of Australia’s self-employed population, 63 per cent are not making super contributions.
One-third of the “unsupered” have a superannuation balance of zero.
Mercer’s estimate of the number of unsupered does not include people earnings less than $8000 or people over 70.
A full spectrum of occupations is represented. And it not just young workers missing out; 440,400 of the unsupered are in the 35 to 54 age group.
The majority are low income earners, with 587,700 earnings between $8000 and $40,000
The unsupered are forfeiting $4 billion of annual contributions, and an estimated $145 billion of retirement savings if they remain outside the system through their working lives.
The Australian Taxation Office has introduced a number of measures to improve compliance with employers’ superannuation guarantee contribution obligations.
However, Australia excludes the self-employed from its mandatory system on the grounds that they need flexibility to invest in their businesses and the at the business asset will provide a form of financial security in retirement.
Mercer points to Finland, where the pension scheme requires self-employed workers to provide an annual wage earnings estimate, upon which pension contribution calculations are made.
It suggests that the super guarantee payment obligation could be extended to the self-employed at a lower rate initially, say 3 per cent. BAS requirements could be extended to include SG contributions.