The question was recently put to me asking what my wish list was for superannuation in 2015. Specifically, the person wanted to know which one (or two) priorities were on my policy radar. Good question.
The Cooper Review in 2010 set the way for significant change in the superannuation industry and this is certainly what has occupied copious amounts of times both for me and for other industry stakeholders. Advocating, negotiating and consulting on the necessary legislation and then implementing the many changes were a high priority for many years.
Even with the current government’s ‘hands-off’ superannuation commitment, there has still been plenty of work to do, including reviews of the governance of super, the Financial System Inquiry (FSI), Budget submissions, working with regulators etc. To be clear, I do not question the validity or necessity of this work in this stage of the super industry’s evolution.
Throughout much of the processes in recent years, however, there has been little commitment or work done to create a set of objectives for our retirement income system.
This is what I see as a priority for myself this year – to encourage, promote and advocate for the development of a long-term set of objectives for our retirement incomes system (only objectives for superannuation were suggested in the FSI report).
It concerns me greatly that further changes will occur without any clear line of sight about what we want and need the system to look like in the long term. We know that constant tinkering has significantly undermined the confidence of many Australians in the super system.
How do we want our super system to interact with the aged pension? Do we accept heavy reliance on the aged pension, or in 50 years’ time, do we want most Australians to be largely self-reliant in their retirement?
When the objectives are clear, it will become much easier to assess the merit of further change against this. Without a clear set of objectives, how do we know we are heading in the right direction?
Have I got it right or do you think my focus should be elsewhere? Have your say below.
Liz Westover, head of superannuation, Chartered Accountants Australia and New Zealand.
Hi Liz
Another topic I’d like to see on the table is the inequity in super between people living in capital cities compared to those in regional and remote locations. Higher wages in Sydney are based on higher house prices. Higher wages also = higher SG every month. And once the house is paid off the higher wages, and therefore ability to save, continues.
Apart from housing the overall costs are pretty similar between a capital city and a regional centre, so retirees in Sydney end up with much more savings to fund their lifestyle.
And what happens to the higher wages people in Sydney get and put into their family home – it gets passed to the next generation as a higher inheritance.
While I agree that having objectives should come first, I do have one change that I believe has been overlooked for far too long. The inability of employees to make deductible contributions for themselves. I believe that this would encourage further savings by people whose employers are unwilling to salary sacrifice or don’t know until year end how much spare cash they have to contribute and can’t put in place a salary sacrifice arrangement in advance.
Liz, you’ve certainly picked an important topic to focus on. The cost of an aging population is creating increasing budget pressures on all levels of Government. I believe the conversation can extend from what you’ve raised into a broader one which includes a sustainable age pension/health costs discussion, and also life quality discussions.
Personally I’d prefer to have super set at 18% and the age pension start at 65, instead of the current plan to have less going into super each year but instead we work until 70.
At the sustainability level, its simply not fair to have the current national debt and add to it with increasing costs of supporting an aging population. Past Governments and voters have caused the problems, and it seems unfair that people not yet born should pay the price.