A “surprising appetite” for personal debt has eroded the benefits of compulsory super, an industry report claims.

The report from Certified Practising Accountants (CPA) Australia reviewed the compulsory superannuation guarantee two decades after its inception.

Channelling extra money into superannuation is unlikely to generate higher levels of personal savings, the report warned, sparking a debate among accountants regarding the state of superannuation policies.

“Lump sum superannuation benefits are being treated as a windfall and being used to pay for the lifestyle that’s being lived now instead of being put aside to provide income in retirement,” it said.

“At best, all that has been achieved is to make some savings compulsory instead of voluntary, and quarantine these savings until retirement age,” CPA Australia says in the report.

The report, which examined the level of household debt in relation to increases in super balances, found super savings have been offset largely by private borrowings.

The findings from CPA Australia come as last week Coalition leader Tony Abbott affirmed his pledge to defer the increase in compulsory superannuation payments for two years.

Under the Labor government, payments will increase to 12 per cent from 9.25 per cent by 2020.

The report’s findings have drawn criticism from some super industry professionals, with the Industry Super Network labelling the report “irresponsible”.

ISN chief executive David Whiteley said in a statement the methodology of the report was flawed and the findings contradict the Reserve Bank of Australia.

“This (the link between household debts and super savings) ignores evidence that household debt has increased in almost every advanced economy irrespective of their retirement systems,” he said.

Whiteley says findings from the RBA show household debt in Australia is similar to that in most developed countries and claims the report overstated the rise in household debt compared to assets by excluding the $4.2 trillion from home ownership.

“The report flies in the face of clear evidence that home ownership significantly improves retirement outcomes.”

“Our pool of domestic superannuation savings is the envy of other advanced economies. It helped reduce the fallout from the GFC, and its investments in the real economy, like infrastructure, support productivity and employment,” he says.

Since 1992, CPA Australia found aggregated household savings have increased from $350 billion to $1.15 trillion.

Despite the increase in savings, CPA Australia says from 2002 onwards household debt increased on par with super savings, thereby offsetting the savings gains.

CPA Australia head of business and investment policy Paul Drum told SmartCompany the issue concerns Australia’s savings, not limited to super.

“It’s not about bashing the baby boomers or the retirees, it’s just saying personal debt is the equivalent of people’s lump sums, it’s a savings issue.”

“There are many tax concessions afforded to people putting money into super, so we need to look at what this mean in terms of long-term costing,” he says.

Drum says CPA Australia was “alarmed and disappointed” by the report’s findings, but acknowledges the super industry has “served us well” over the last 21 years.

“The first thing is to accept there is a problem here and then look at the problems both in and out of super.

“The Henry Tax Review talked about there needing to be a concessional tax rate on personal savings and other paths of income, but super was quarantined from this review. We need a broader debate including super,” he says.

CPA’s report was also criticised by Australian Institute of Superannuation Trustees chief executive Tom Garcia who told The Australian Financial Review the report made large assumptions and was “a bit of a long bow”.

“You’re not going to undo SG (super guarantee), we’re going higher… it’s like a keel for the rest of the economy. As we start maturing, more and more people are coming through using retirement income streams – it will be a better system, we just have to simplify it,” he says.

– www.smartcompany.com.au