Will the SG Rate increase?

The current SG rate is 9%.   However, a 9% contribution, even over a 40-year working life, may not produce sufficient capital to support a reasonable amount of income in retirement.

Consequently, there are good reasons to increase the 9% to 15% or more.

Three things are often forgotten when discussing this issue:

• the 9% rate is really 7.65% once tax is taken off the contribution – so the opening position is not as strong as many believe
• any increase in effective cost of labour will reduce the demand for labour; and
• any increase in the SG rate will take so long to implement (given that the phase in of the new rate will be so gradual) that the increase will not have any significant impact until 20 or 30 years’ time – so it is not a current solution.

The obvious answer is simply remove payroll tax and increase the SG rate by 5 or 6 percentage points.  No costings, no modeling and no analysis has been undertaken prior to making this statement.