People in the 30s, 40s should be able to defer 3% super increase: Expert

People in their 30s and 40s are more likely to be under financial stress and therefore should be given the choice to opt out of increased super levels, an academic says.

Bruce Bradbury, senior research fellow in the Social Policy Research Centre at the University of New South Wales, says it makes more sense to allow people to pour money into super when they aren’t paying off their house or raising children.

With the Government late last year passing laws for a gradual increase in the superannuation guarantee to 12% by 2020, Bradbury says allowing workers in their 30s and 40s to forgo the increase would better reflect how people live their lives.

“Super is all about moving income. In some stages, you have higher expenditure requirements,” Bradbury told SmartCompany this morning.

“And to a certain extent, we should be letting people make their own decisions.”

According to Bradbury’s analysis of official data, households in their 30s and 40s are more financially stressed than those in their 50s and 60s, as evidenced by the late payment of utility bills and the gap between income and expenditure.

“People in their 30s and 40s are saving the least, whereas people in their 50s and 60s are saving the most, and people in their 20s are also saving a bit,” he says.

In his report entitled, Saving the young from superannuation, Bradbury argues that superannuation contributions “impose large burdens on young adults at a time when they can least afford them”.

“Even though the superannuation guarantee is paid by employers, it is generally agreed by analysts that the cost of the employer contribution ultimately falls on wage earners via reductions in wage increases.”

“This means that, while superannuation saving addresses one important issue of lifecycle resource transfer (low incomes in retirement), it exacerbates another.

“Uniform rates of contribution increase the financial stresses faced by families during the household formation stage of life.”

Bradbury adds that if workers needed to fill in the paperwork to retain the extra super, many wouldn’t bother.

Other options for relieving the financial burdens of those in their 30s and 40s are allowing access to super for life-related expenditures such as childcare fees or to supplement paid parental leave. “Finally, one could simply allow super funds to pay out some funds to people under certain ages,” he suggests.

The comments come as Roy Morgan research into superannuation and wealth management in Australia shows that women retire with 40% lower super than men.

This is due to women:

• Taking time off to have children.
• Being less likely to work full-time.
• Getting lower pay across all age groups.
• Being less likely to make voluntary contributions, and likely making smaller contributions when they do.
• Retiring earlier or not returning to work.

The research, released last month, notes that just 61% of females have super, against 69% of males, and the median balance for women in $27,919 against $51,210 for men.

The average balance in super is $91,840 for women and $153,560 for men.