A Liberal Senator has argued for allowing people on low incomes to opt-out of receiving Super Guarantee contributions – instead receiving the money directly – at a time when senior members are ruling out changes to the Super Guarantee.
Liberal Senator Andrew Bragg has used his first speech to the Senate to argue that people earning less than $50,000 should be able to opt-out of superannuation.
This comes at a time when some Coalition backbenchers are arguing for the Super Guarantee to not increase further, which senior ministers have ruled out.
Bragg – who has worked for Ernst & Young and the Financial Services Council – used his speech to criticise superannuation, and the superannuation industry.
“Superannuation has made the unions, banks and insurers richer than ever,” Bragg said, pointing to Grattan Institute figures that $30 billion a year is spent on superannuation fees.
“Super is a classic case of vested interests triumphing over the national interest. The fees are too high, there is not enough competition and there is insufficient transparency.”
“Compulsory superannuation is almost 30 years old. Super is now almost twice the size of the economy and the capitalisation of the securities exchange. We have the fourth-largest private pension pool in the world with only 25 million people. It remains a strange but huge experiment.”
He pointed to other Grattan figures that the tax concessions on super may not be offset by age pension savings for decades to come. Though the Grattan Institute modelling has recently come in for strong criticism from the superannuation industry.
“So what does this money do? Most of the funds invest in the same index-hugging way. The super industry contains layer upon layer of intermediation, with the same request from government: higher and higher mandatory contributions. As lawmakers, our duty is to focus on the public interest. I do not believe this system is working for Australians.”
Instead, Bragg proposes that superannuation be voluntary for Australians earning less than $50,000 a year.
“Taxpayers could simply tick a box to get a refund when filing an annual tax return.”
Modelling from Rice Warner, commissioned by Bragg, estimated the savings – to the Federal Budget – would be $1.8 billion in the first year.
Also, unless the next Intergenerational Report shows that super will reduce the cost of the age pension in the future, and that higher super will improve retirement standards, Bragg said he would be inclined to make the whole super system voluntary.
Labor’s Shadow Assistant Treasurer and Shadow Minister for Financial Services, Stephen Jones, told Sky News that the idea was a “direct threat to the retirement savings of millions of Australian workers” and would be “devastating to the retirement savings of average workers”.
Jones compared the current situation around superannuation to the Coalition under Malcolm Turnbull, with “policy being developed and then rolled by the backbench because of their ideological opposition to sensible propositions”.
PM confirms review of retirement income systems
Asked about the idea from Bragg in a press conference, the PM said he wouldn’t “over-interpret” it as it is common for Parliamentarians to set out broader and personal views in their first speeches, while policy is developed by “our internal processes as a party”.
“On the points of policy that you raised, I have been very clear. The Government’s policy has not changed. The Treasurer made that very clear also yesterday in Question Time.”
Asked about a review of retirement incomes, the PM said: “That is a recommendation that has been put to us. We conduct that review, it’s one will be actioning and are not going to limit it. But the Government’s policy, let me be very clear, is what is set out in what the law of this country is and our policy hasn’t changed.”
When asked if the review would be free to inquire into such topics, the PM answered: “Reviews look at all sorts of things, but they are reports of reviews, not of the Government.”
The Productivity Commission recommended a review of retirement income systems ahead of the next Super Guarantee rate increase in 2021. In addition to the recent promises of no slower increase to 12%, the PM promised no new or higher taxes on super during the election campaign.
More to come.