The Shadow Assistant Treasurer and Shadow Minister for Financial Services, Stephen Jones MP, used his presentation at the FSC Summit to focus attention on Australia’s $2.8 trillion superannuation industry and its emerging challenges.
By Ben McAlary
.
In his keynote session at The Summit on Wednesday 28 August, Jones championed the success of the superannuation system to date, while reminding participants of the need for “urgent reform”.
“Australia’s superannuation system sits alongside the Pharmaceutical Benefits Scheme, Medicare and the National Disability Insurance Scheme as significant national achievements, which have made our nation both stronger and fairer. ”
“Despite a low level of engagement, superannuation is very popular. 91% of Australians support the superannuation system, however, the success and popularity of super doesn’t mean it’s perfect.
“There are urgent areas of reform that demand the attention of both Government and industry.”
Quoting policy suggestions from “a gaggle” of coalition backbenchers, Jones raised his concern that any roll back of previously legislated increases to guaranteed super, or the introduction of new legislation to make superannuation voluntary for lower income individuals would, “disproportionally effect women in low income occupations. The women that look after our children, who clean our offices and others who work in hospitality and the retail sector.”
“Women are already retiring today with 47% less superannuation than men.”
“I am appalled that people want to design a system where low paid workers have no right to the independence and security in retirement that they are set to enjoy.”
Jones said that any reform needs to be made with the singular purpose of our superannuation system in mind, as opposed to other benefits or unintended consequences.
“While superannuation does attract beneficial tax treatment, it is not a system for tax management. While superannuation does provide a pool of savings for older Australians, it is not about estate management. While superannuation has provided a new pool of funds for investment, it is not a system that is designed with the principle purpose of delivering $30 billion a year in fees and commissions to industry participants.”
“Superannuation has, and always will be, about affording Australians some independence and dignity in their retirement.
It is performing this task.”
On the issue of adequacy, Jones reiterated the Labor party’s commitment to the legislative timeframe which “has been delayed twice and has already cost workers retiring today, somewhere between $60,000 and $100,000 in their retirement incomes.”
“The big losers (of any delay to legislation) will be lower paid workers and women.”
Besides adequacy, Jones raised the underperformance of funds as another fundamental policy area that must be addressed.
“The Productivity Commission revealed that there are at least 5 million members stuck in underperforming funds. Bad asset allocation is an enormous killer on superannuation returns.”
“Consistent long-term performance can be the only measure of success. We can give no comfort to sleepy funds who are complacent about below par performance. The cost to a member of being defaulted into an underperforming fund is enormous.”
“That is why we need to be careful with the single super fund for life recommendation born out of the Hayne Royal Commission recommendations.”
Finally, on the issue of underpayment of super, Jones made reference to recently released statistics that highlight the “growing problem.”
“Nearly three million Australians lose out on their superannuation entitlements annually, the equivalent of $6 billion every year. In the three years to 2017 the unpaid superannuation grew by 25%”
“Moving to a fortnightly basis, or aligning to payroll systems might be a way to assist in dealing with the problem. This suggestion has considerable merit and Labor will consult with small and big businesses on how it could be done to provide a win-win for all.”
“Addressing these issues needs to be a national priority,” Jones added.