The list of issues in Australia’s superannuation arrangements needing urgent attention is long and well rehearsed. Anyone in the industry can reel it off: adequacy, tax burden and complexity, the load of regulatory change, erosion of savings through fees and charges, and the effectiveness of regulators.
From the Australian Institute of Superannuation Trustees’ (AIST) perspective, we would add the lack of satisfactory super provision for those who spend years out of the workforce or work shorter hours for low pay.
From a safety point of view, the Government has stated that there are too many small funds and we would not disagree with that observation. But moving beyond the industry and government perspective to the community’s, there is an overriding problem where we have seen virtually no action.
It is clear from recent surveys, and indeed from my own experiences every time I take listeners’ questions on radio or address a meeting, that most people do not understand super. This lack of understanding occurs right across society, from academics and business executives to taxi drivers and shop assistants.
Ten years after the Super Guarantee was legislated, bringing the whole workforce under its umbrella, this community ignorance is an indictment on our policy makers.
When fund members struggle to understand how their super is taxed, what fees they are actually paying and what they get for them, how their money is invested for the long-term, and how much they are going to need for their retirement years, they are not likely to make the best decisions for themselves. They may accept unsuitable advice, and in some sad cases, actually lose their savings.
Many people are in fact in soundly run funds that serve them well. But in the current climate, members are going to look at the one figure they do understand, how much their fund earned for them over the last year. They will be disappointed. In this climate of low returns, it is especially timely to start a public education campaign.
The campaign should use the mass media as well as the funds’ own communications. It should provide clear information on how super works, its long-term nature, how to benefit from tax concessions, and how to boost savings with voluntary contributions.
The public needs help to understand fees and charges, how to amalgamate accounts, and where an employer offers choice, how to choose a suitable fund. People increasingly want to know where their money is invested, and whether the companies selected for investment act in a socially responsible way.
Some of this information is in the public domain, but not necessarily in places and language friendly to the consumer. Commercial providers of super products churn out huge amounts of material, but most of it is marketing hype rather than independent information. The role of financial advisers can be crucial, but is not generally well understood.
With the size and expertise of the industry, it would not be too difficult to design an accessible, universally informative program. But who should pay for it?
The Government has a responsibility here. The Government gets billions of dollars each year from super taxes, and super investments provide an engine for economic growth, generating employment and more taxes. Further down the track, the Government will lose out if the super arrangements fail. The public purse will have to provide what private savings don’t deliver.
Superannuation has a new minister, the Assistant Treasurer Senator Helen Coonan. She has got off to a good start by stating her willingness to talk to the industry. If she were to pick up the idea of a public education campaign, she would find the industry right behind her and eager to help. More importantly, the electorate would welcome information so crucial to their future security.
— Susan Ryan is president of the Australian Institute of Superannuation Trustees.
