The Federal Government says a new superannuation scheme will be simpler and cheaper to use, potentially easing the burden of red tape faced by small business owners.
Speaking in Parliament today, Superannuation Minister Bill Shorten said the Government’s new default super product, MySuper, has simple features and no unnecessary fees.
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The new scheme is part of a reform package aimed at making super transactions cheaper and faster while improving the system’s integrity.
According to Shorten, the reforms are estimated to increase retirement super balances by almost $150,000 for a 30-year-old full-time worker earning an average wage.
MySuper will replace existing default options from July 12, 2013.
The Government’s announcement comes on the back of a new report showing Australia’s super pool will grow to $6 trillion by 2030.
However, the report also claims the nation will face a severe shortfall in retirement savings.
According to the report, most baby boomers have too little super to fund their retirement and the gap will not close by 2030, despite the forthcoming increase in compulsory contributions.
The report predicts Australia’s total super assets will grow to $3 trillion by 2020, $4.5 trillion by 2026 and more than $6 trillion by 2030.
However, many Australians won’t have the $500,000 they need in super to live comfortably in retirement.
The report warns the average lump sum for a single man in 2030 will be $217,000, meaning he has a 78% chance of outliving his super income stream.
“The reality is that most people are underfunded,” says Michael Davison, senior policy advisor for superannuation at CPA Australia.
“Particularly for small businesspeople, who have lean years when they don’t contribute much, and then good years.”
Yesterday, legislation was introduced into Federal Parliament to increase compulsory super contributions from 9% to 12%.
According to Deloitte partner Wayne Walker, the increased contributions will see an extra $408 billion pumped into the system by 2030, which will help younger workers in particular.
Peter Strong, executive director of the Council of Small Business of Australia, believes small business owners should not be responsible for the distribution of super payments to employees.
“We are forced to become involved in a superannuation system where the industry funds… are very inefficient in their recordkeeping and communications processes, and where we are the only group who can be fined for getting it wrong,” Strong says.
“Superannuation [should] be included in normal PAYG payments and the system made much easier and more efficient as a result.”