Finally, the Government has been able to get its long-awaited cut to the surcharge for high-income earners and its co-contributions scheme for lower-paid workers through the Senate (after securing the support of the four independent senators).
Will it be able to do the same for choice-of-funds and portablilty? And what will the Labor Party’s choice-of-fund model look like when it is unveiled at the Association of Superannuation Funds of Australia (ASFA) conference in Brisbane later this month?
Super Review’s survey of super funds providing SRI options (see p21) highlights just how little members make use of the choices offered to them. Almost half (46 per cent) of respondents described the uptake of their SRI options as poor. Only one fund said demand was “exceptional”, but noted that the SRI option was its default option.
Could this low uptake be the result of abounding perceptions that SRI means sacrificing returns? Or, could it be part of the wider trend that sees most members languishing in default options? It’s hard enough to choose one option within a fund, never mind between the dozens of retail and not-for-profit funds out there.
The world of super is extremely complex and whether choice-of-fund is legislated or not, many Australians already make their own choices. If they aren’t properly informed, they could make bad choices that eat into their retirement savings. Or, if they seek help, they could pay often unnecessary commissions and trails to financial planners that also eat up their nest eggs.
Of the $28.7 million set aside for choice by the Government in the 2002-03 Budget, $14 million is earmarked for a public education campaign. ASFA, however, believes this will not be enough. In its pre-Budget (2004-05) submission, ASFA calls on the Government to allocate $70 million more over three years for an education campaign.
We hear so much about choice-of-fund these days and not much about improving the public’s financial literacy and understanding about super, which, surely, is an essential forerunner to choice being introduced. This, surely, is not a “chicken or the egg” debate.
