Money Australia - August 2019

extended warranties that offerlessthanthe
manufacturer’s warranty.
Another consideration is thateligible
credit cards can entitle you to receivean
extended warranty when you purchase
items with that card. The itemmayneedto
be registered to claim the extendedwarran-
ty. Comparison website Finderwarnsif you
cancel the card you used for thepurchase,
the extended warranty will alsobevoided.
When considering the purchaseofan
extended warranty, the regulatorsuggests
consumers always ask the supplier“totell
you what it gives you over andabovethe
rights you have under the consumerguar-
antees. While some extended warranties

mayofferprotectionoverandabovethat

providedbythelaw,theydonotreplace

theconsumerguarantees.”

Sowhatexactlyaretheconsumer

guarantees?

Theyarea guaranteethatproducts

aresafe,lastingandhavenofaults.Prod-

uctsmustalsolookacceptableanddo

everythingonewouldnormallyexpect

themtodo– withthetypeofproduct

andcosttakenintoaccount.

Productsmustmatchdescriptionsmade

bythesalesperson,onpackagingand

labels,andinpromotionsoradvertising,as

wellasmatchanydemonstrationmodelor

sampletheconsumeraskedfor.Thereare

AnnetteSampsonhaswritten

extensivelyonpersonalfinance.

Shewaspersonalfinanceeditor

withTheSydneyMorningHerald,

a formereditoroftheHerald’sMoney

sectionanda columnistforTheAge.

Shehaswrittenseveralbooks.

theywillthenincreaseby0.5%a yearto
12%in2025.

IMPACTONSAVINGS
Somereports,suchasa recentonebythe
GrattanInstitute,a publicpolicythink
tank,arguewedon’tneedtoliftsuperto
12%,statingtherisewouldtake$20billion
a year from workers’ salaries without
giving them a better income in retirement.
Under the current 9.5% rate, it says most
people would retire with 70% oftheincome
they had while working.
But others have argued thatweneed
12%, citing the fact that not everyone
works full time until 67 or benefits
from super over a full working
life. Research has consistently
shown that it is time in super
that counts. Those who
didn’t start receiving
contributions until they
were older, people with
periods out of the
workforce and workers
forced to retire earlier
than expected (due to
redundancy, ill health, or
other causes), lose the
benefit of years of regular
contributions.
Women, in particular, risk
a poorer retirement with the
average female super account
balance at retirement around
$115,000 less than that for the
average male. Women also livearound
five years longer, requiring moremoney
for their retirement.

David Knox, senior superannuation

partner at Mercer, told a recent Actuaries

Summit that Australia’s net replacement

rate of pre-retirement income is 40.7%,

compared with an OECD average of 65%.

The Association of Superannuation

Funds of Australia (ASFA) has called for

the move to 12% to be accelerated if the

budget permits. It recently undertook

research that showed around 80%

of respondents support the increase.

WHAT DOES THAT MEAN

IN OUTCOMES?

While it will vary according to your

income and circumstances, ASFA’s

modelling found a 30-year-old worker

on $70,000 today with $50,000 in super

would have $71,000 less at age 67 if

compulsory super stays at 9.5%. Bringing

forward the additional contributions

would add another $7000 to their

retirement kitty.

Thankstocompound interest, the

youngeryouare the more benefit you’ll

getfromhighersupercontributions.

Whileolderpeoplewillstillbenefit,

ASFAfiguresshowa 55-year-old

part-timeworkeron$40,000

with$100,000insuperwillbe

around$7000betteroffat

retirementif theratemoves

to12%– oraround$700

a yearinextraincome.

ASFAhasalso

calculatedthatthe

proportionofpeople

over 65 receivinga part

orfullagepensionwould

fallfromaround70%

nowto60%by 2055 if

compulsorycontributions

werelifted.

DIDYOUKNOW?

Australiansnowhavemorethan$2.8trillion

invested in super. Compulsory super originated from

an agreement between government, employers and

unions in the mid 1980s to trade off wage rises for super

contributions to keep a lid on inflation.

BEST-CASE SCENARIO

As the Productivity Commission pointed out, many fund members

are still missing out on maximising their super benefits through problems

with the system. Ideally these could be sorted out without

changing the compulsory super timetable.

WORST-CASE SCENARIO

For older workers and those with broken work patterns, any delay in

compulsory super would make it harder to fund a comfortable retirement.

THE WILD CARD

If the economy slows further or goes into recession,

there would likely be calls to further delay the extra super

cost for employers or to dump the idea altogether.

An economic shock could also hit members’

investment returns.

more than 10 other consumer guarantees on

the ACCC’s website.

What you need to keep in mind – for

both manufacturer’s and extended warran-

ties – is that if you have a valid claim for a

refund, repair or replacement, the retailer

must handle your claim. According to the

ACCC, the retailer “generally cannot insist

you deal directly with the manufacturer,

even if your claim falls under a manufactur-

er’s warranty”.

Since December 2012, the ACCC has

offered its free Shopper app, which provides

guidance on refunds, warranties and lay-

bys. It also helps you decipher the country

of origin labels on food items.