A combination of the super guarantee supplemented with a means tested Age Pension incurs a significantly lower budget cost than providing a similar retirement income via a more generous publicly funded age pension, new independent analysis by Rice Warner Actuaries shows.

The Rice Warner report found the Superannuation Guarantee will save the budget $17 billion this year, rising to $100 billion, (in current dollars) by 2058.

The new report, commissioned by Industry Super Australia, assesses various policy scenarios using a comprehensive group based fiscal model that considers all relevant variables including the impact of the super guarantee on the age pension, personal wealth, income and company taxes.

The analysis, which is the first of its kind, considers the full fiscal impact of effectively abandoning the Super Guarantee and all associated tax benefits and reverting to a more generous, but means tested, publicly funded pension that would deliver broadly equivalent retirement benefits.

In the scenario the maximum rate of age pension is increased by 50% to deliver the same outcome as the current age pension and the SG for a median wage earner.

In effect it replicates the path other countries have taken when they don’t have compulsory privately funded retirement schemes.

The report also found the scheduled rise in the super rate – which has increased only once in 18 years and is due for its first affordable incremental rise of 0.5 per cent next year – will improve the budget bottom line through lower age pension payments in the future and increased revenues on the extra assets accrued through compound returns.

Freezing the super rate at the current level of 9.5 per cent – about 6 per cent less than the 15.4 per cent super the federal politicians calling for the rate to be scrapped take home – will not result in an improved fiscal position over time.

Repealing the legislated rise would mean that both current and future taxpayers would be forced to pay more personal income tax, and age pension costs will rise in the coming years and decades.

Read more @Mirage News