“People can relate to $1 out of every $10 going into superannuation,” Senator Hume was said to have told the meeting. “It’s a nice round number.”
The Victorian senator, who has worked in banking and with Industry Super funds, said the 10 per cent mark should not be taken as an indication of an intention to stall the legislated timetable but would be an opportunity to increase financial literacy.
“One of the cognitive barriers to engagement in superannuation is complexity, but the clear and simple message that one in 10 of every dollar you earn goes towards your retirement savings will cut through and focus attention,” she said in a statement on Wednesday.
The first increase is scheduled just before the next likely federal poll, potentially turning it into a major election issue.
Senator Hume said the sector would be “brought into focus like never before” as super moved “to the legislated increase to 12 per cent” after the retirement income review.
The legislation has been fiercely opposed by more than half a dozen Coalition MPs who believe historically low levels of wage growth means workers need more money now than savings for retirement.
Prime Minister Scott Morrison has slapped down the rebels by admonishing them in a party room meeting while he and Treasurer Josh Frydenberg have repeatedly stated they “continue to support” the legislated timetable in public.
New analysis by two former treasury officials, Phil Gallagher and Bruce Bastian, to be released on Thursday by Industry Super shows a median worker will have an increase of $18,100 in lifetime income through the increase. The research challenges claims by the Grattan Institute that workers would be $30,000 worse off in lost wages if it went ahead.
Industry Super chief executive Bernie Dean said “punters can readily identify when something doesn’t stack up”.
“If you go out into the real world and say you are getting 9.5 per cent in super on top of your wages and you will actually be better off over your lifetime if that is frozen – they can see through that.”
The Grattan Insitute’s Brendan Coates, whose research expanded on findings from the Henry Tax Review, said 10 per cent was “less bad” than going to 12 per cent as super increases took away from pay rises.
“The less that compulsory super increases from here the better,” he said.
Grattan found the difference between 10 per cent and 12 per cent would be up to $15 billion in compulsory super contributions each year.
Eva Scheerlinck, chief executive of the Australian Institute of Super Trustees, said research from the World Economic Forum that found the average Australian will run out of retirement savings 10 years before they die showed “9.5 per cent is not going to be enough”.
Association of Superannuation Funds of Australia chief executive Martin Fahy said 80 per cent of the public backed an increase in the superannuation guarantee.
Dr Fahy, who represents industry and retail funds, said the retirement income review should not be used as a stalking horse for pausing the compulsory super rise.
“If our education system was delivering the way our super system is we’d be just behind Finland and Singapore and having parades in the street,” he said. “Instead we are saying it’s a shonky system that is ripping off people and taking an axe to it.”
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra