-1.svg "Close Icon (3)-1")
.svg "Close Icon (3)")
- Share
-
The looming issue of adequacy in retirement funding continues to unite and divide commentators, politicians and the superannuation industry. Financial services organisations seeking to boost engagement, educate members and ensure Australians’ long term financial security continue to fight what is, at times, an uphill battle.
A statement released by global bank HSBC last week revealed that a study of 15,000 people, including 1,000 in Australia, confirmed what most of us already know. Far too many of us are seriously financially underprepared for our retirement.
At the same time, in the Coalition’s Budget reply speech last week, Leader of the Opposition, Tony Abbott, declared a ‘budget emergency’ and announced that, if the Coalition wins government in September, to make the savings necessary to retain the tax breaks linked to the carbon tax after the tax itself is axed, a Coalition Government would defer the increase in the Superannuation Guarantee for two years.
Not surprisingly, the response was swift and divided.
The Finance Sector Union described the delay as an attack on the retirement savings of all Australian workers. The industry body for SMSF professionals, SPAA, said it could see no reason for the delay, and that because many employers would have funded the increase from employees’ salaries, the cost to business was not necessarily onerous.
Consulting firm Deloitte agreed, saying that the delay was “understandable, but disappointing, not in the best interests of Australians and that the sooner the guarantee gets to 12% the better it will be for Australians, businesses and the country”.
On the other hand, the Australian Chamber of Commerce and Industry backed the measures as showing a “welcome sensitivity to the plight of small business”, particularly when they are combined with the proposed abolition of the carbon tax and root-and-branch review of competition policy.
Enter the Industry Super Network, which said that deferring the increase will result in short-term budget savings of $1 billion per annum over the next seven years, which the Coalition may see as necessary to deal with the “budget emergency”.
Labor has accused Mr Abbott of going back on his word by making “unexpected changes to super”, something he had stated the Coalition would not do. Minister for Financial Services and Superannuation, Bill Shorten, highlighted the negatives for women, who typically have less super than their male counterparts, and are more likely than men to be working part-time, particularly if they have young children at home.
Superannuation industry body ASFA, took a slightly softer view – saying in a media statement that while it has long been a supporter of an increase in the superannuation guarantee to help ensure adequate retirement savings, the super guarantee is only one tool in an arsenal which should be including aged care, healthcare and access to the Age Pension.
Whether or not you agree with Labor or the Coalition about the superannuation guarantee, there are some immutables in the argument, uncomfortable realities that no amount politicking can conceal.
First is the premise of the entire discussion: as our longevity increases, Australians are living longer and longer in retirement. Expecting the Age Pension to continue to bridge the shortfall between retirement savings and living requirements is not realistic: we either pay now, or pay later. But at some time we will pay. Thus, a concerted effort to increase the retirement savings of all Australians should be at the forefront of the agendas of Governments of all stripes.
It is also universally agreed that encouraging Australians to take an active interest in their super would help increase retirement savings. It’s no secret that most of us don’t pay as much attention as we should, given the balances concerned – let alone have a full understanding of what reforms like Stronger Super mean in practice. The fact that the rules continue to change apace is a likely contributor to this. Who wants to commit to a rule that may change tomorrow – especially when your life savings are involved?
Which brings us to another point of consensus: that we need more stability, more consistency and fewer changes if we are to boost trust and confidence in super – surely a vital first step to increasing engagement.
So, what’s the answer? Perhaps a paring back to begin with the basics: the points of agreement, rather than difference. Because it’s clear that the current approach is leaving us more than a little short.
