Changing nature of work opens up $10 billion shortfall in superannuation
18 May 2018
A $10 billion shortfall in superannuation savings, compromising the retirement outcomes of millions of Australian workers and the system more broadly, is expanding with the increasing changes to traditional ways of work according to new research commissioned by AustralianSuper and Cbus Super.
The research estimates that 2.3 million Australian workers now partially or entirely fall outside of superannuation coverage which equates to around $10 billion in missed superannuation payments each year.
In the absence of intervention, these figures will rise to 3.1 million individuals and $23 billion in contributions by 2027, representing one in five workers.*
The gig economy and 'non-traditional ways of working' are changing the employment landscape and technology has made it easier to segment work into smaller parcels often falling outside of the scope of superannuation.
Women are especially penalised by the current model, being more likely to participate in part time or casual work, which increasingly comes in the form of a contractor rather than employee relationship.
Women – particularly those in part-time work – are also overwhelmingly caught by the outdated provision that restricts superannuation payments to individual jobs earning more than $450 per month.
This is a problem large enough to undermine the success of Australia's retirement income system requiring a multifaceted response from policy-makers, regulators and the industry.
AustralianSuper Group Executive Membership, Rose Kerlin, said the changing nature of work means the $450 threshold for payments is penalising more and more workers.
“The abolition of the $450 threshold and the increase in the Super Guarantee to 12% as soon as possible are the key reforms needed to ensure the superannuation system keeps pace with the changing nature of work in the economy and ensures members can achieve the best possible retirement,” Ms Kerlin said.
“AustralianSuper believes that without meaningful reforms the superannuation system will be leaving vulnerable workers behind when it comes to retirement. The abolition of the $450 threshold could help up to 1 million Australian workers with second jobs or low-income employees boost their superannuation savings.”
Cbus Chief Executive Officer David Atkin said that in the construction industry – for which Cbus is the leading industry superannuation fund – transient contract work, casualisation and self-employment is not new, but it is increasing and it is impacting people's retirement savings.
“Not surprisingly, the construction industry features prominently in the research around those not receiving compulsory super contributions, with an estimated gap of nearly $2 billion a year impacting the retirement savings of nearly 350,000 people,” Mr Atkin said.
“After 25 years of compulsory superannuation in Australia, it is clear there is a large and growing number of Australian's not sufficiently saving for their retirement.
“It's time for industry, regulators, policy-makers, employers and unions to come together to discuss solutions.”
The research by NMG Consulting points to a design fault in the scope of the current superannuation guarantee legislation and its predication on traditional, full-time, continuous employment. It also concludes that the exemption for the self-employed, based on the assumption that they will accumulate assets in their business to fund their retirement, has not been validated by experience.
*Data and modelling in this submission are drawn from research conducting by NMG Consulting (unless stated otherwise). It is anticipated that the full research report will be released in the first half of 2018.
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