The battle lines over the future shape of superannuation in Australia is now being formed after the government’s review into retirement income concluded with a report due by June.
Already the review has been seen as highly political with significant pressure to change the planned schedule of rises in superannuation from the current 9.5% to 12% by 2027.
As it turned out, there were plenty of suggestions in both directions.
Unions want super increased to 15% with a fast track for women
As you might expect, the ACTU recommended an increase in the super guarantee to 15% together with a fast track for women so they could get their balances up more quickly.
At the other end of the scale was Sydney University economist Dr Cameron Murray who said the current superannuation system should be wound down and replaced by the Age Pension because it is much more efficient.
He said scrapping the super system would massively improve Australia’s economic performance and argued that the current super system is ‘costly, inefficient, unnecessary, and incredibly unfair.’
The super system required 55,000 people and $36 billion per year in fees, while the pension required just 7,000 staff and $1 billion in administration costs.
Winding down super would boost the economy
Dr Murray suggested people who have already accrued superannuation should be given $20,000 a year to spend in order to slowly and safely dismantle the current system, which would in turn help to boost the economy.
“Most people will not spend the maximum from their super account, but there is no doubting the stimulatory effect of this change for the real economy — something that is sorely needed as wages reach nearly a decade of stagnation,’’ he said.
Most of the other submissions came somewhere in between those extremes so there is plenty of scope for the review to come up with a wide range of recommendations, with the only certainty being that some people will be very annoyed with what is recommended.
Review sure to be a political football
The recommendations are also certain to turn into a political football with any efforts to slow down or scrap the legislated rises of the super guarantee sure to be opposed by the Labor party.
Some of those more in the middle with their submissions included the Grattan Institute household finances program director Brendan Coates who warned that increasing payments to super to help women and disadvantaged people could end up harming their financial future.
As part of its submission to the review, the Grattan Institute produced research showing that increases in the super guarantee were largely paid for by workers in the form of lower wage rises.
Higher super leads to lower wages?
‘‘Lifting compulsory superannuation would leave low-income earners, including many women, under even more financial stress while working,’’ Mr Coates said.
He also said that the planned increase in compulsory super should be abandoned, with a boost in rent assistance a better idea to help those at risk of poverty in retirement.
Liberal senator Andrew Bragg said the superannuation industry had gotten away ‘‘without much scrutiny’’ and also argued that contributions should not be increased.
‘‘It is a common thread across the board, banks and unions … It’s always their solution that the answer is more and more super,’’ he said.
The Australian Institute of Superannuation Trustees recommended the government stick to the increase in the guarantee to 12% and also suggested an increase in rent assistance.
So, the trillion dollar fight is really going to be on once the recommendations come out in June.