In a new report titled Dynamics of the Australian Superannuation System – The Next 20 Years: 2015-2035, Deloitte argues that changing demographics and increasing longevity will threaten the adequacy of Australia's retirement system.
On top of this, a 12 per cent employer superannuation guarantee (SG) – which will not be in place until 1 July 2025 – will not be enough for Australians to be financially independent in retirement, said Deloitte head of superannuation Russell Mason, discussing the report.
According to Deloitte, for a 30-year-old male earning approximately $65,000 per annum to produce a retirement income equivalent to the ASFA Comfortable Standard ($42,861 a year for a single individual) they would have to contribute 17.4 per cent of their income to super for the balance of their career.
For an equivalent woman to reach the 'comfortable' retirement income level she would have to contribute 19.5 per cent of her income to super from age 30, due to career breaks in order to raise children.
Deloitte proposed a number of options to increase the amount contributed to super, the first of which is a compulsory member contribution in addition to the employer-funded SG.
Members could be required to contribute three per cent after tax to their super, said Deloitte, with the "possibility of an option to opt-out".
"When Paul Keating first designed the superannuation system in the early 1990s, he intended compulsory contributions to reach 15 per cent of salary – 12 per cent from employers and 3 per cent from employees," said Deloitte.
Mr Mason said additional "out of pocket" after-tax contributions would have the added bonus of helping Australians become more engaged with their superannuation.
Along with increasing contributions, Deloitte restated its proposal that there be a lifetime 'cap' on concessionally taxed contributions in order to acknowledge that Australians voluntarily contribute more to their super when they are 45 or older.
Deloitte's modelling suggests a lifetime cap of $580,000 would be sufficient to produce a retirement income in line with the ASFA 'comfortable' standard from age 65 to the 75th percentile of life expectancy.
