Why not increase compulsory super?

[Tysonboss1]

Doesn't increasing interest rates just divert money into banks then? I wouldn't complain if the stockmarket took off due to more money being put in super, I would probably just be more conservative with where my money is going in my super.

Not so much, Because the Banks might be making an interest rate margin of say 2% on home loans,... So when the reserve bank was charging them 5% the banks would add 2% and loan the money out at 7%,... now that the RBA is charging 7% they are lending the money out at 9% still pretty much the same margin,... infact if there loan book starts to shrink because less people are getting loans then it can have a negative affect on their cashflow.

The RBA offcoarse will be getting the extra cashflow and just stockpiling it,

 

[Struzball]

It is actually a coincidence this article came up the same time I started this thread.

http://www.news.com.au/business/money/story/0,25479,24144864-5013954,00.html

By the sounds of the 'public' opinions I don't think people will be very happy about it

 

[Tysonboss1]

It is actually a coincidence this article came up the same time I started this thread.

http://www.news.com.au/business/money/story/0,25479,24144864-5013954,00.html

By the sounds of the 'public' opinions I don't think people will be very happy about it

they are still only saying that the employee's have to put 1.5% of there pay towards their own retirement plan,... The little Aussie battler lives the most sheltered cotton wool wrapped existence on the planet, nothing is their responsibility, they expect every thing should be catered for them either by the government or business...

 

[Beej]

Yes to an extent, However prices will only move up in a certain asset class so far before the returns in another asset class become more attractive so the smart money will begin to be diverted in a different direction.

Look at the situation we are in now some of the best companies in the world are trading relativly cheaply at the moment, so when money starts rolling back into the share market these big stable blue chips will recover first but as they recover and become expensive again the money will move to smaller caps, overseas markets, emerging markets, startups, etc etc.

sophisticated investors will always be diverting the money to areas of higher returns,

Also Super is not a one way street, Just as there are lots of people paying money into super, there is also people drawing money out, so as the baby boomers start to retire alot of funds are going to be drawen away from the sharemarket and into Cash, Bonds, property etc.etc... So I actually think that unless Gen Y starting investing more heavily then the combined affect of the Baby boomers of Australia, NZ, USA and UK. may have a sucking affect on the markets for some years.

I agree! While the initial proposition seems like a sensible argument on the surface, dig deeper and that's not how things really work.

Bottom line, that "extra" money, whether it goes into super, or not, has still been earned either by an individual or business, so therefore it ends up somewhere in the economy anyway. Any "spare" money in the economy - whereever it ends up, will be saved or invested (including in the stock market) - the only difference with super is there is less government forced re-distribution of that money due to the concessional 15% flat tax rate.

So I don't think it would inflate the stock market artificially at all, and what's more, if the aussie market became saturated with funds (which would be obvious as average P/E ratios would rise to unreasonable levels) the money would find other homes - o/s stock markets have more than enough capacity to absorb excess aussie super funds for example, then there is global property, fixed-interest and cash. Plus of course many other alternative investments (a class that is growing dramatically at the moment for exactly this reason). As good example of this I think is the "Future Fund", which did not invest much in the aussie market at all as they were concerned about valuation being high, plus the impact of pouring $50B into the market in that state - so they invested it elsewhere. This would happen more and more as the pile of national savings increased over time.

So increasing the compulsory super contribution would I think help the economy dramatically due to a true increase in net national savings. It would also make more and more capital available for productive purposes such as new capital raisings, new business floats etc etc.

I would agree however with other comments that the cost should not be imposed on business - as Keating did in the past a deal would have be done with unions etc such that the super was increased in increments over time and would be taken in lieu of pay rises.

My 2c worth.

Cheers,

Beej

 

[bvbfan]

I'm all for it. No way a standard 9% contribution will provide enough in retirement.

The increase though will be one of the first steps in getting rid of the aged pension down the line. 2025-30 I think it will be gone.

Many forget that the SGC was supposed to be 15% already but those financially responsible idiots got rid of it at the start of the biggest bull market.

 

[theasxgorilla]

Over here I'm paying 18.5%, of which 2% is controlled by me... the rest goes to a government pension fund to pay for the current wave of pensioners. From what I understand I don't get direct access to that 2% part either...but the results I get from investing it determine how my input into the pension is counted which will ultimately determine what I get from it. Still getting my head around it as most of the juicy stuff is in Swedish.

 

[DB008]

Depends on your age of course and how much you have at the moment in that nest egg of yours.
I'm under 30 and should have no problems retiring well before the retirement age.

 

[nioka]

A better way to control spending and save for retirement would be to disallow hire purchase without having a reasonable deposit for the item desired. In the 50s it was not possible to buy a car without having a sizeable deposit. The deposit was 40% for a second hand car and 33% for a new one. The wait for a new car could be as much as a year. No such thing as "no deposit and no repayments for 3 years".
To have compulsory saving through super and at the same time encourage high interest debt seems counterproductive to me.
To fund savings with debt is like a company borrowing or having an SPP to pay a dividend.

 

[Ageo]

Super should be compulsory in some cases (ill give you an example). My dad's worker (bricklayer) wants more money as his wife is sick and he is the only 1 that can work. He needs more money to survive and keep his house (which he says is his super). But because of the high wage we pay him already and the workers comp/super contribution onto of that it makes it hard to increase his wage.

By law we have to pay his super but for our worker he would rather us pay him that extra 9% in his pocket so he can keep his house and provide for his family then put it into a super fund that is useless to him at the moment. The dumb thing about it is that he will basically be forced out of his home because of a stupid law. If super were to be increase then i believe the employee should be responsible for at least half.

 

[trading_rookie]

For all those business owners out there, hope you're aware the "little Aussie Battler" is now also entitled to 9% on their bonus and commissions

What kills super is the middle men - these good for nothing financial wealth services and wolves in sheep's clothes that go by the moniker of "financial advisers" who rock up at your company providing a solution that your company is only too happy to pass over to them to deal with at no cost to the company - but ultimately to the employee.

Finally, an MP (Sherry) who has admitted fee's are too high and need to come down to at least 1% and new rules governing who can and cannot give advice. Part of my fee's go to these middle men who have never done anything for me yet have no trouble taking the cream on top...