False narratives risk undermining the superannuation system

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A senior member of the superannuation industry has warned that the retirement income system risks being undermined.

Association of Superannuation Funds of Australia (ASFA) CEO Dr Martin Fahy told the ASFA conference that “superannuation is currently in the grip of a contagious false narrative which risks undermining the retirement outcomes of Australians”.

“Thirty years on from its modest beginnings our superannuation system has become the target of a misleading and dangerous narrative that seeks to present anecdote as data, internationally recognised success as a threat to the existing capital markets order and compulsion as a dangerous ideological plot to undermine western liberal democracy.”

“This combative narrative labels our system, unaffordable, failing lower income earners, inefficient, lacking transparency, and that it eats wage growth. At the most ludicrous level it suggests that in the worst-case retirement scenario you can eat your house, rely on a rental supplement, and that your grandparent’s retirement was good enough for them and its good enough for you. In summary we can’t afford your aspirations.”

The most contentious debate around superannuation currently is if, and to what level, the Superannuation Guarantee rate should be raised. The Grattan Institute and members of the Coalition, have been at the forefront of calling for a pause or freeze to increases in the SG rate.

On the same day that Fahy was giving his speech, Liberal Senator Gerard Rennick told the Senate that the Coalition “sold out its personal responsibility values when it didn’t stop this cancer called superannuation”.

“Millions of dollars gets sucked out of the pockets of the battlers in the bush and sent to the blowhards in Sydney and Melbourne to manage, all for a small cost of around $37 billion a year in management fees.”

Pointing to OECD data, Fahy said the Australian retirement income system compared favourably with other countries – which see the Australian system as a “benchmark and an excellent example to follow as they look to progress their own”.

“Central to the defined contribution system design is compulsion, universality and adequacy of contributions. These in turn underpin its sustainability, with the projected fiscal cost of delivering the retirement outcomes Australians’ aspire to remaining relatively low and steady over time.”

“Yet how can it be that locally, our system has so many detractors, despite all evidence to the contrary? Others want to emulate us, yet we find ourselves in a deep malaise that is proving difficult to shake.”

Fahy said that the Review of the Retirement Income System is an opportunity to “move beyond this rhetorical hyperbole and dysfunctional narrative economics of retirement funding”. But to deliver on its purpose of setting out an evidence base, it should make public Treasury’s Model of Australian Retirement Incomes and Asset (MARIA).

“An open and transparent publication of the dynamic micro simulation model at the heart of the review would finally lay to rest the falsehoods that plague the superannuation debate in Australia. It would provide a platform for an informed evidence-based debate on the important issues of adequacy, benefit design and the impact of assumptions regarding CPI, wage growth, and capital market returns.”

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