Why 12% super is crucial

For everyday Australians, 12% super just gets you to adequacy.

Which makes it all the more reckless that One Nation wants Australians to cash out a quarter of compulsory super contributions into current spending, and an Opposition frontbencher is back arguing for Australians to raid their retirement savings for house deposits. Both ideas are inflationary and would make Australians poorer.

Your super has one job: to be your pay cheque through a retirement that could last almost as long as the career that funded it.

Those arguing to dismantle 12% super typically make three claims: that a lower rate would still deliver an adequate retirement, that higher super comes out of workers' wages they need now, and dipping in early would leave the budget no worse off.

Here are why those assertions are just plain wrong.

First, some invoke the Retirement Income Review findings to assert that 9.5% super is enough.

But that review had known flaws. It didn't model retirement projections on 9.5% employer contributions alone. Instead, it assumed all workers also made extra salary-sacrifice contributions themselves of up to 2.3% over a working life - effectively taking their total contributions rate to 12%. Yet it simultaneously conceded that "few middle to lower income earners make voluntary contributions".

It also assumed Australians have 40 unbroken working years - when that is the reality for only 24 per cent of women and 39 per cent of men. Caring responsibilities, interrupted careers, and shortened working lives when your health goes downhill can take years out of everyday people's super contributions.

Finally, its claim that a third of every super dollar will end up as an inheritance by 2060 is just wild. In 2024-25, two in three retirees with their savings in the nation's biggest super funds withdrew above the minimum. Bequests are only about 5 per cent of total benefit payments.  And recent research put retiree spending at over $120 billion this year. Retirees are clearly spending their super.

On wages, now that super has reached 12%, the trade-off claim can be tested directly. Wage growth averaged just 2.1 per cent through the seven years the super rate sat frozen at 9.5 per cent. Once increases resumed and the rate climbed to 12%, wage growth accelerated to 4.1 per cent by 2024. The data doesn't show what the trade-off critics predict. If it did, the years of super rate freeze should have been the years of outsized wages growth.

On the budget, the Parliamentary Budget Office found that giving retirees the same living standard via a higher Age Pension instead of super would leave the budget $102.7 billion worse off by 2032. Our own modelling shows that, without super and no change in pension rates, pension spending would be $12 billion a year higher by 2028-29 - and 512,000 more Australians would need to be on the taxpayer-funded pension.

So which Australians have benefitted most since the Super Guarantee was introduced?

Our recent research answered this question. Over the last 20 years, low and middle wealth retirees' super coverage has more than doubled, there's been strong growth in real average balances, and super incomes have doubled in real terms for middle wealth retirees - five times the growth of top wealth retirees. Pension reliance among over-65s has now fallen from 71 per cent to 53 per cent.

The 12% rate is especially crucial for all those Australians who take time out of paid work to care for young children or disabled or elderly relatives, and for those who work part-time or end up unemployed for a bit. Three percentage points over a working life with compound earnings amounts to $132,000 more super by retirement.

12% super is doing what it was built to do: give millions of everyday working Australians a dignified retirement income and lower the Age Pension burden for taxpayers.

None of this makes the system perfect. The gender super gap persists. Under-18s who work less than 30 hours a week are still denied super. Renters, single women, and people taking time out of work to care for loved ones still don't have enough retirement security. Unpaid super remains a scandal. And debates around tax concessions continue.

But on adequacy, real-world evidence that takes into account the lived reality of working people's lives shows 12% is the minimum than delivers an aging population the quality of life they deserve in retirement.

When Australians reach retirement, they think 'Thank God I have my super' - and they know they would never have been able to save enough without its safeguards.

All politicians have a duty to keep Australians' super strong. The retirement incomes of millions of everyday working Australians right across the country depend on politicians not stuffing it up.