No SG for over-70s: now, that’s not fair

Article update: Great news! The Government is listening to SuperGuide readers. For the latest proposals on extending Superannuation Guarantee to over-70s read the article SG to be paid for over-70s from July 2013.

I have received a lot of encouraging emails from readers commenting on my top ten problems list, including a timely email from one reader about the fact that Superannuation Guarantee ceases when an employee turns 70. She writes:

“…If you are still working after 70, employers should still have to pay super contributions. It’s pure age discrimination otherwise. In effect at 70 you take a pay cut while doing the same work you did the day before you turned 70. Letters to MPs are no help: no one wants to do anything about this one.”

Superannuation Guarantee (SG) is the official name for compulsory super contributions made by an employer into the super account of an eligible employee. The amount of the contribution is the equivalent of 9% of the employee’s salary. For most wage earners, the employer pays the wage plus super. If you’re on a salary package, your SG entitlements are generally included in your package amount.

Employers are only required to pay SG until the age of 69: when an employee turns 70, then say goodbye to SG contributions.

I agree with this reader’s views, and believe that stopping SG at 69 is inconsistent with the Government’s policy of encouraging Australians to work longer. Why should individuals who choose (or have no choice) to work longer, miss out on a standard work entitlement that fellow workers receive? Such a policy does indeed smack of age discrimination (or perhaps it merely reflects a Government who keeps on changing the wrong super rules).

How can the Government continue to allow a policy that denies workers an entitlement because they are simply getting older?

Taking a pay cut at age 70

You’d hope that when SG is not payable because an employee turns 70, that the employer would then adjust that individual’s pay to ensure the worker receives more cash.

If you’re on a salary package presumably the employer continues to pay your total package, and employees aged 70 or over would then receive extra cash rather than a super contribution. The actual outcome in this scenario may depend on what the employee signed when commencing work.

If you’re on an award, or an hourly rate or a typical wage earner, then what happens to the money that your employer no longer pays into a super account when you turn 70? For the reader who contacted me, it means she gets a pay cut. That’s a disgrace, although I actively encourage her to chat to her employer for a commensurate increase in wages, and hopefully decency may win the day.

In the current climate, where the Government have extended eligibility age for the Age Pension from 65 to 67 (from the year 2023) in recognition of the fact that Australians are living longer, the policy makers are remiss in not reviewing the age limit for SG entitlements.

Mr Cooper and his colleagues on the latest super review need to look closely at some of the age limits on superannuation policies (including SG and co-contribution scheme); age limits that no longer properly reflect the current working population. For the super review’s terms of reference see the section at the end of the top ten problems article.

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