A Government Minister has argued against increasing the Super Guarantee rate, and suggested that the superannuation industry is calling for increases out of self-interest.
The Government appears to be building a case, ahead of the Budget in May, for wages in the present over superannuation in the future.
“It would be wrong to think that the ‘super-guarantee’ is a guarantee of someone’s present lifestyle in retirement,” said Minister for Revenue and Financial Services Kelly O’Dwyer at the AFR Banking and Wealth Summit.
“Nor would it be right to think that the super-guarantee particularly benefits low income earners. Far from it.”
“In fact many low income earners are being forced to save for a higher standard of living in retirement than they can afford while they are working.”
Minister O’Dwyer said the Super Guarantee has a “detrimental impact” on individual’s wages.
“This is something that should be top of mind in a historically low-wage growth environment.”
The Coalition delayed increases to the SG rate – it is currently 9.5%, but would now be 11% under the previously legislated timetable. Assistant Treasurer Michael Sukkar recently said the Government was “vindicated” and it was “absolutely the right decision”. Labor has not said if it would reverse this change. The ALP platform is supportive of raising the SG rate, while not committing to a time-frame.
Minister O’Dwyer used the speech to suggest the superannuation industry was calling for increases in the Super Guarantee rate out of self-interest.
“The superannuation industry is often very quick to point out that the only way that people can achieve higher incomes in retirement is by compelling an ever increasing amount of wages to be sacrificed into superannuation. But they would say that wouldn’t they?”
“The increase of 9.5% to 12% will mean around $10 billion a year more flowing into the industry in 2025-26.Which, of course, means a bonus of hundreds of millions of dollars in fees each year for the industry and ever increasing salaries for industry professionals.”
Minister O’Dwyer also took aim at spending by super funds, into which the banking Royal Commission has been tasked with investigating.
“Members of superannuation funds have to stand by and watch as their retirement savings are spent on straight out political advertising. Or dubious sponsorships of union congresses. Or on superannuation liaison officers who are in fact union officials being paid out of super funds. Or on a lobbying outfit whose principal achievement last year was to stand in the way of the regulator, APRA, getting important new powers to protect members’ money.”
“The fact is, mandating what people must put into their superannuation isn’t the only way to increase retirement savings.”
“A far better way is to ensure that those people who want to save more than the mandated amount have sufficient flexibility within the system to do that.”
Minister O’Dwyer put forward five “key principals” that should guide superannuation policy making. This is despite the Government currently having legislation before the Parliament to set an objective for superannuation – a Bill which hasn’t been debated in over a year.
The five principals are that the system should: be fair; give people the ability to make choices; have the highest standards of governance, money must be protected and deliver certainty and stability.
There is a report that the Government will use the Budget to give certainty to older voters through some kind of ‘guarantee’ on superannuation rules.
“One of the greatest criticisms of superannuation has been the constant changing of the rules,” said Minister O’Dwyer.