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Wednesday, November 19, 2008

Do we need more super?

I don't think so. As for the Minister...

Superannuation Minister Nick Sherry says he is unable to say whether the current compulsory contribution of 9% of salary is enough to enable Australians to retire in comfort.

"This is a very complex set of issues," he told the National Press Club.

"We specifically ruled out increasing the 9% employer contribution during the term of this Parliament. That stands and will stand.

"I am not confident that the 15% across-the-board solution that the former prime minister Paul Keating has advocated publicly is the correct solution.

"But we need to look in a very detailed way at what is the right solution."

Senator Sherry said the Henry Tax Review would examine the question when it considered the adequacy of retirement incomes and that he would present it with a submission.

"I am a great one for doing this thoroughly"...

"Actuaries say you need approximately two thirds of pre-retirement income. But that's premised on most australians owing their own home. It also depends how long you have been contributing to super. If you are retiring and have only had contributed 9% since July 2002, as many have, compulsory super actually won't have made a lot of difference to you. If you have been in the system for 35 years it will have made a massive difference."

"It's very complex and coming up with simple solutions isn't easy."

"The first issue to settle is the adequacy of the age pension. You cannot come to a conclusion about adequacy of 9% super until you come to a conclusion about the pension."

The Minister rejected a suggestion that the contribution rate should be increased in response to the poor returns generated during the financial crisis.

"I certainly don't think that increasing the level of contributions is the answer to the negative rates of return," he said. Over the long-term, super earnings remained on track to grow by an average of 5% per annum in real terms as projected in the government's Intergenerational Report.