Increasing the Superannuation Guarantee Rate to 12 Per Cent

1 July 2013 will mark the beginning of the gradual increase in the superannuation guarantee (SG) rate to 12 per cent. The SG rate will be increased gradually with initial increments of 0.25 percentage points on 1 July 2013 and on 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the SG rate will be set at 12 per cent. The current SG contribution rate is 9 per cent.

Australia's system of compulsory superannuation savings, which has been in place since 1992, has contributed significantly to national saving. Australia's pool of superannuation savings today stands at over $1 trillion, increasing investment potential and ensuring that reliance on foreign funds is lower.

The Intergenerational Report 2010 underlines the challenges posed by our ageing population. The number of Australians aged over 65 is projected to grow from 3 million to 8.1 million by 2050. Over the next 40 years, the ratio of working age Australians to those aged over 65 will decrease from 5-to-1 to just 2.7-to-1. A major challenge is to ensure an adequate retirement income for our ageing population.

The superannuation measures that the Government is introducing are projected to generate an additional $10 billion by 2020 and $35 billion by 2035 in private saving each year. In aggregate, the measures are projected to add around $500 billion to the existing pool of superannuation savings, and contribute to further increasing national savings by around 0.4 per cent of GDP by 2035.

Around 8.4 million employees are expected to benefit from this measure.