The Association of Superannuation Funds of Australia (ASFA) acknowledged the government’s reaffirmed commitment to increasing the superannuation guarantee (SG) to 12 per cent contained in the federal budget as an important step towards providing adequate retirement savings, particularly for women and younger Australians whose superannuation has been severely impacted by COVID-19.

“Australia’s superannuation system enables Australians to retire with dignity. With the legislated increase of the superannuation guarantee to 12 per cent, and a maturing superannuation system, we expect to see a greater proportion of retirees relying less on the Age Pension and more on their retirement savings,” ASFA CEO Dr Martin Fahy said.

Dr Fahy said that ASFA has been steadfast in advocating for the removal of the $450 threshold, which will be especially beneficial to low-income and casual employees, the majority of whom are women, giving them an entitlement to super that higher-paid employees have as a right. This was found in recent ATO data which suggests around 197,000 women were impacted, compared to around 114,000 men.

“Critical social policy issues arise due to women’s lower super balances including poverty and homelessness in retirement. We must continue to work towards broader structural reform to close the gap and improve retirement outcomes for women,” he said.

The Australian Institute of Superannuation Trustees (AIST) also welcomed the removal of the $450 monthly income threshold for super contributions announced in the federal budget. This includes lifting the compulsory super rate to 12 per cent as well as other reforms that are needed to prevent women, low-income earners and other vulnerable Australians from facing financial hardship in retirement.

“Removing the $450 monthly income threshold is welcome and long overdue, but increasing the super compulsory rate to 12 per cent as legislated is the vital piece in preventing many women and other vulnerable Australians from experiencing poverty in retirement,” Eva Scheerlinck, AIST CEO, said.

Ms Scheerlinck said the removal of the $450 monthly income threshold was particularly important for the estimated 300,000 workers — predominantly women — working in multiple low-paid jobs.

“Abolishing this threshold will make a real difference to a cohort of low-paid workers who have been missing out on compulsory super payments. In this modern era of payroll systems, there is no justification for an arbitrary income threshold that hurts the retirement outcomes of our most vulnerable workers,” Ms Scheerlinck said.

Ms Scheerlinck said the legislated timetable to increase the SG to 12 per cent, with the first rise due to come into effect on 1 July 2021, would ultimately make the biggest difference to the retirement outcomes of vulnerable Australians.

“Increasing the super rate to 12 per cent is vital to the retirement security of women and low-income earners who are more likely to experience broken work patterns, insecure employment and involuntary retirement,” she said.

However, commenting on the extension of First Home Super Saver Scheme, Ms Scheerlinck said the existing scheme, which to date has had very low take-up rates, was unlikely to put a dent in Australia’s housing affordability crisis because it did nothing to address the underlying problem of lack of supply.

“If the government is serious about tackling Australia’s housing affordability crisis and helping young people buy their first home, it needs to improve the supply of affordable housing and reform tax policies that have fuelled the housing bubble,” she said.

The Actuaries Institute also welcomed the major changes but noted big issues remain.

“The government has not leveraged the Retirement Income Review to make more impactful changes to the retirement incomes system, such as measures to help non-home owners (renters) in retirement, in particular some of the most at risk of poverty in retirement — single female renters,” said Actuaries Institute president Jefferson Gibbs.

“The system also still lacks an overall objective for superannuation and its role in supporting retirement incomes.

“The Institute urges the government to provide clarity on the purpose of superannuation, to enable more substantive reforms to be sensibly made to improve the system.”

Ian Yates, chief executive of the Council on the Ageing (COTA) Australia, said that, ultimately, older Australians will benefit from several measures in the federal budget aimed at increasing workforce participation and fixing retirement incomes, but support for vulnerable groups like renters is still missing and long-term solutions are needed to ensure vulnerable Australians are adequately supported.

“We also welcome the provision for the relatively small number of people trapped in legacy retirement products no longer fit for purpose to convert to more contemporary products, transferring the underlying capital,” he said.

“Lowering the age of the downsizer scheme to 60 will also help older Australians boost their savings by downsizing their home while freeing up housing stock for bigger households.

“But while this will benefit home owners, support for renters is again missing from this budget at a time when the housing crisis has reached new lows. The government must raise Commonwealth Rent Assistance as a matter of urgency to support families in rental stress and prevent many at risk of homelessness from falling through the cracks.

“The government must also commit to begin work on a more sustainable retirement income system. I expect to see legislation introduced to implement the Retirement Income Covenant by July next year, no later than one year before its scheduled commencement.”