Superannuation requires incentives from all sides

Comments on Dennis Shanahan “Fund retirees now or pay for it later”, 3/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25724258-17301,00.html

There is an issue of how much superannuation contribution would be enough and this issue has to be settled first.

It seems that 9% is deemed insufficient. But how much would be sufficient? It could be a tricky question, because it can vary from person to person. Of course there should be a minimum level and that level should be a key benchmark to consider and decide how much compulsory super contribution should be made.

There is also the issue of private contributions that has to be taken into account too.

A society should not only make employers to contribute to employees’ super, but also encourage employees themselves to make voluntary contributions. An efficient system should rely more on everyone own initiatives, provided they have enough relevant information to make informed decisions.

It may be the case that the current 9% employer contribution to employees super without employees’ own co-contributions is good enough. The next step may be to consider a co-payment system in which employers should match dollar for dollar of employees’ own contributions up to a set percentage of employees’ salaries. Government can provide further tax incentives to employees, such as those applied to the current salary sacrifice.

A system that involves employers, employees and the government work together seems a more attractive than any other system.