Make no mistake, super is under attack

Some two months ago, Super Review suggested that the superannuation industry “circle the wagons” because it was facing a significant attack from aggressive and influential sections of the Morrison Coalition Government.

If the industry had any doubt about that warning, then it should have been removed when a group of Coalition back-benchers openly and very publicly called for the Government to abandon the timetable for lifting the superannuation guarantee to 12%.

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This had been an obvious part of the agenda for some parliamentary members of the Coalition for months but it had become obscured by the issues generated by the COVID-19 pandemic, not least the Government’s hardship early release regime and the pressure applied to funds to comply rather than criticise.

The backdrop to all discussion around superannuation has been the Government’s Retirement Income Review and the superannuation industry should now accept that this is the conduit via which the Coalition will pursue change to some of the most fundamental superannuation policy settings.

It is also the backdrop against which superannuation industry trustees and executives should examine the long-run implications of the Government’s hardship early access regime and the none-too-subtle suggestions by back-benchers such as NSW’s Senator Andrew Bragg that people should be allowed to utilise their superannuation for a home deposit.

Importantly, the Government-appointed Retirement Income Review panel began receiving submissions from the industry and other participants in January, but none have been received since the start of the COVID-19 lockdown meaning that they reflect neither the realities of the pandemic nor the gravity of the recession in which Australia now finds itself.

What we know about the Government’s hardship early release regime is that it has proved much more popular than either the politicians or superannuation fund executives predicted and that, in many instances, there is clear evidence that young superannuation fund members have effectively emptied their accounts, or gone very close to doing so.

As we report elsewhere in Super Review, the ability of these young members to restore their account balances will not be made any easier if the Government decides that the superannuation guarantee should be frozen at either 9.5% or 10%.

What needs to be remembered about the superannuation guarantee is that, contrary to the views of many small businesses, the money is not theirs. It is foregone wages and belongs to their employees. 

In the current circumstances where, prior to the massive job losses associated with the COVID-19 shutdown, Australian wages growth was already stagnating, placing a further prolonged halt on increasing the SG to 12% will only magnify that situation.

What needs to be remembered about the Australian superannuation system and prosecuted by the major superannuation organisations is that it is amongst the best regimes in the world and, properly managed, will serve to reduce pressure on the Australia’s social welfare expenditures in the decades head, particularly the Age Pension.

The negative impacts of the Government’s hardship early release regime will not be felt next year or the year after. They will be felt in around 40 years’ time as the 25 to 30 year olds who have emptied out their superannuation accounts in 2020 realise how little they have to retire on 2060.

Few people, if anyone, will remember Prime Minister, Scott Morrison and the Treasurer, Josh Frydenberg, when that reality occurs and they are even less likely to remember what they spent the money on unless it was, genuinely and appropriately, on hardship relief.