Industry Super Australia estimates that a couple could lose up to $170,000 by the time they retire and that a person on a median wage could lose about $1500 in superannuation contributions a year in today’s dollars if the superannuation guarantee rate does not increase from 9.5% to 12% as currently scheduled. These estimates are based on the following assumptions:

• A starting wage of $59,800;*
• The assumed salary increase of 3% per annum has been adopted as an average figure based on a 37-year projection — that is, from the age of 30 to the retirement age of 67;
• An annual investment return after tax before performance fees of 7.5%;
• An asset‑based performance fee of 0.58%;
• An annual administration fee of $78 per annum in today’s dollars;
• Insurance premiums are excluded and presumed to be $0 per year;
• An annual inflation rate of 2%. In addition, a further annual increase of 1% is included to take into account the cost of meeting increases in community living standards. This means a total assumed inflation rate of 3% is allowed for;
• Employer and voluntary contributions, fees and the concessional contribution cap increase with wages;
• Each of the couple will satisfy the Work test at older ages and so are able to contribute to superannuation;
• When the couple exceed the concessional contributions cap ($25,000 in 2020/21), they pay contributions taxaccording to their adjusted taxable income on any additional superannuation contributions;
• Retirement at the Age Pension age of 67;
• This model works for accumulation funds only. It will not work for defined benefit funds;
• This model does not allow self-employed people to project their retirement balance;
• Outcomes are based on contributions being made annually, at the mid-year point, on fees being deducted annually and investment returns being credited to the accounts annually;
• Super is invested in a balanced option;
• Superannuation Guarantee Contribution is currently 9.5% of ordinary time earnings and is presently legislated to incrementally increase to 12% by 2025;
• The LISTO applies from 1 July 2017;
• No tax is payable on fees;
• That Tax File Numbers have been provided;
• All amounts are in today's dollars, which means they are adjusted for inflation.

Local data on what the average person living in an area could lose if the super guarantee increase, as legislated, is cancelled.

Localised data is based on a microsimulation model using data in the ATO’s 2016-17 sample tax files. To project wage and taxable income impacts in 2021-22, the ATO file population was grown according to Budget estimates of employment and wages growth. The rise in the SG rate from 9.5% to 12% is treated as occurring in one movement in 2021-22, rather than adding up impacts over the preceding years.

The assumptions used to estimate the potential impact of changes to the Superannuation Guarantee are, in our opinion, reasonable for the purposes of working out the estimates. The assumptions are based on objective evidence on long-term net returns, fees, relevant economic forecasts and analysis on wages, prices and productivity.

*based on ABS median wage data, August 2020