The Federal Government needs so start thinking about superannuation as part of the total economy instead of just a retirement tool or pensions issue, according to the chief executive of Tower Group, Jim Minto.
Minto, who was recently elevated to head up Tower in both Australia and New Zealand, used a recent interview with Super Review to reinforce his earlier calls for Australia’s superannuation regime to be simplified, arguing that as a $700 billion industry it requires a greater national strategic focus.
He said this was particularly the case in circumstances where funds were finding themselves capable of exerting a greater influence on the economy through investment in equities, property and infrastructure.
Minto said that one of the underlying issues confronting the Government is that the complexity of Australia’s superannuation regime is acting as a disincentive towards consumers taking ownership of the money they have in super funds.
He said there was a danger this would continue to be the case even after the implementation of the choice of fund regime.
Minto said that while choice might succeed in bringing more focus to the benefits of superannuation, there was a danger that this would still be undermined by the industry “over-hyping” the situation.
Looking at the possible answers for the Government, Minto suggested that lowering the tax regime applying to superannuation represented a sensible starting point.
“Right now, superannuation is taxed at three separate points,” he said “In investment earnings and out of the fund, it also has different tax treatment depending on if you are in accumulation phase or income phase.”
Minto threw up the example of a person who wanted to withdraw money from his superannuation where he would have to first meet a condition of release, then need to work out the eligible termination components and then work out the taxation of the benefit and then work out if the superannuating surcharge applied.
“That is just a withdrawal,” he said. “Imagine if someone wanted to do a recontribution strategy and wanted to commence a pension.”
Minto said the Government needed to look at ways of fostering a generational shift in acceptance of superannuation and away from reliance on the age pension with industry and government working together to get a better result.
