Analyst suggests two-tier super

People under 50 need protection from any increase in super contributions: Policy analyst.

People under 50 need protection from any increase in super contributions: Policy analyst.

PEOPLE aged under 50 need protection from the proposed increase in superannuation contributions because many are under financial stress, a leading policy analyst says.

Bruce Bradbury, a senior research fellow in the Social Policy Research Centre, the University of New South Wales, said younger Australians should be able to take back the compulsory 3 per cent increase in the Superannuation Guarantee to spend on what they needed.

''The point of superannuation is to help us move resources to the retirement years when our income is low,'' he said. ''But the policy doesn't take into account the other stages in life when people also have high needs, typically when they're buying a house and having children.''

The federal government plans to gradually raise the contribution employers make to employee superannuation from 9 per cent to 12 per cent. Many academic analysts believe this will be at the expense of future wage increases.

Calculations by Dr Bradbury based on Australian Bureau of Statistics data show younger people are much more likely than the over 50s to struggle to pay bills and to save.

For example, 20 per cent of people aged under 30 could not pay a telephone, electricity or gas bill on time in the past year, and 17 per cent in their early to mid-40s also had fallen behind. But the proportion of late payers fell steeply after the mid-40s to less than 5 per cent among the 65 and older group.

In his analysis, Saving the young from superannuation, Dr Bradbury shows people in their 30s and 40s save on average only 2 per cent of their income while people in their 50s and early 60s save 10 per cent. People aged 35 to 39 actually spend more than their income.

''In their 30s and 40s people are taking time off work to care for children and they're buying a house,'' he said. ''By the time they get into their 50s and early 60s, they have surplus cash.''

Dr Bradbury said it was not practical to reduce the contribution rate for younger people. Since employer contributions were effectively incorporated into wages, this would mean different wage rates for different employees. However, one option would allow super payouts for younger people for prescribed uses, or allow them to ''take the 3 per cent out and make their own decisions''.