THE Federal Government has introduced legislation to lift the superannuation guarantee to 12 per cent by July, 2019.

About 8.4 million Australians will have their superannuation savings boosted, it claims, presenting, as usual, the benefits as manna from heaven.

It neglects to say who is going to pay for the increased savings.

In fact, businesses will be lumbered with extra costs until they can defray them by reining in employee wage growth. Ultimately, superannuation funds will commandeer more of workers' wages.

In today's dollars, if the 12 per cent increase eventuates, workers on median incomes of $47,000 a year will be eventually forced to contribute an extra $1410 a year to their superannuation accounts. Their total annual contribution will jump by 33 per cent to $5640 a year.

That means less take-home pay. After tax, it's a reduction of almost $19 a week. That might mean renting instead of buying a home and certainly lower utility during workers' more active years.

As the Henry review into Australia's tax system pointed out, workers on lower incomes, especially those living in the pricey state capitals, cannot easily offset the compulsory increase in saving by reducing any voluntary saving.

So it's hard to see how increasing superannuation is a win for adequacy and fairness, as the Government claims.

In fact, increasing the superannuation guarantee deliberately curtails the range of choices Australian workers can make. A higher compulsory rate might lift retirement incomes in the future, but nothing is stopping workers from making an additional 3 per cent superannuation contribution now if they wish. Some people might not save enough, others will save too much. In a free society that is natural. The old-age pension still provides a safety net to all those who make the wrong choices while working.

Increasing the compulsory rate might be warranted if it meant smaller government, lower taxes and a more responsible citizenry.

But the cost of the tax concessions provided to superannuation contributions far outweighs the reduction in age pension outlays, even in the long run. That means other taxes will have to be raised to balance the budget.

Increasing the superannuation is wholly paternalistic.

That it nevertheless garners so much support is testament to the wide range of vested interest groups who benefit from it and the tendentious way it is presented to voters.

ADAM CREIGHTON is a research fellow in the economics program at the Centre for Independent Studies.