Australia’s $2.6 trillion superannuation system, the economic envy of the world, is about to become a battle ground for politicians, big business and super providers.
Her are just some of the players who want to convince you to make changes to your retirement nest egg:
- Politicians from left and right are either for a superannuation rise from 9.5 per cent to 12 per cent by 2025, or against it on the grounds that it will cost jobs and mean your pay will stay low
- Industry super funds are squabbling with the private sector about who performs best and who has the lowest fees. They want to maintain their position as a default favourite, meaning they get their money from lazy employees who let their bosses decide where to put compulsory deductions.
- And the government wants to reform the industry, so funds that fail to make strong-performing investments are put out of business.
It’s all making lots of noise. Should you be taking any notice? You most certainly should.
The super system works well. The Prime Minister who created it, Paul Keating, this week came out swinging in defence of his pride and joy, claiming the early release scheme put in place last year allowing the withdrawal of up to $20,000 had seen savings “vapourised on a new Kia car or a new pair of skis.
He told the Superannuation Funds of Australia conference the Reserve Bank had an “anti super” bias and was working with big business to persuade us to take out our savings and spend so companies could profit.
Lots has been written about what that withdrawal can cost. Calculations have ranged up to $120,000 as the super industry battled to try and stop us taking out the savings that earn them fees, and businesses suggested it would be fine so long as we spent it on stuff to save jobs.
We were told it had all gone on betting, not on Kia cars!
So what should we do?
Well, we’re firm believers in super savings. And we know, just like dieting and all those lovely sweet things, there is always a temptation to take the money out hoping a rainy day never comes.
But old age and the need to work less aren’t things that might happen. They most certainly will.
We’re also firm supporters of checking out your super at least once a year to make sure it’s performing. It’s a lot of money, and it’s yours.
Assistant Superannuation Minister Jane Hume is out to deal with those funds which aren’t paying back the trust super savers put in them to deliver – “pockets of extensive underperformance”, she calls it.
“Over the years, duplicate accounts have proliferated, low balance accounts have been eroded through unnecessary insurance and high fees, and disengagement and high opacity have been prime enablers.
“And while some funds have performed exceptionally well, others have not and that underperformance has been hidden behind the skirts of those who have outperformed.”
The Minister has championed a new Your super, Your Future package, which has created intense debate. Like all change which means some laggards will lose their licence to take your money, it is being opposed using your funds to mount advertising campaigns.
To quote the senator: ” Superannuation has proven to be the most frustratingly partisan sector of financial services.”
Her message was reinforced by APRA, the super regulatory body.
“Deputy chair Helen Rowell warned thsoe in the industry who underperformed needed to “get better or get out”.
The government will decide by the May 11 federal budget what to do about increasing super payments.
One option being canvassed is to allow the rate to rise to 12 per cent as legislated, but enable superannuation to be withdrawn early and used to buy a home.
It’s an interesting thought, particularly since property has been one of the great performers of the pandemic. But like a donut to a dieter, savings are only good if they are saved. They need to be there tomorrow and the next day. Bubbles burst.
Meanwhile, industry super is running a social media campaign warning that dumping the super increase or changing super’s preservation rules may force retirees to sell their family home to fund their retirement, or work longer.
The campaign is also targeting people under 35.
They are being told that MPs ‘‘ who pocket more than 15 per cent in super’ ’ are telling them to choose between saving for a house and saving for retirement.
‘‘ It will force a generation to retire with little or no savings outside the home, creating a long-lasting impact on future budgets.’’
A website will be set up so people can calculate how much worse off they will be at retirement.