Soft-compulsion needed for disengaged super fund members: IPA
The Government needs to take a more demographic-centric approach to superannuation policy by adopting a soft-compulsion system for persons under the age of 40, according to the Institute of Public Accountants (IPA).
In its pre-Budget submission for 2012, IPA recommended that current super policy needed to move away from a "one-size fits all" approach and should be based around three distinct demographics - the disengaged (those under 40 years of age), the partially engaged (those 40 to 50 years of age), and the fully engaged (those over 50 years age).
According to IPA executive general manager Vicki Stylianou, a demographics-based approach provides more stability in assessing current policy, compared to focusing on superannuation balances which "vary greatly for a lot of different reasons" throughout a person's life.
IPA chief executive Andrew Conway added that current policy was too narrowly-focused on treating people as either saving for retirement or entering the retirement phase.
While the IPA stated that it support the increase of the superannuation guarantee from 9 to 12 per cent, the introduction of a soft-compulsion system for persons under the age of 40 was preferred.
This would allow people on lower incomes to opt-out of the increase in the superannuation guarantee and maintain their level of income, particularly when buying a house or starting a family, the IPA stated.
The Government needed to better incentivise this demographic (low income earners under 40) to make extra contributions either through tax incentives or by better educating them to view super as a long-term asset of its own, she added.
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