Major bank chief says superannuation needs to be fixed now

Westpac’s head of wealth management says super needs to be fixed now.

Major bank chief says superannuation needs to be fixed now

The head of Westpac’s wealth management division, Brad Cooper, has urged the Government to make sorting out Australia’s retirement income system a top priority, saying it’s now “a burning platform”.

Mr Cooper believes the new Parliament should agree on tightening superannuation tax concessions for the wealthy. He says that the Government’s slim majority, coupled with the uncertainty of the Senate, is creating ambiguity about the future of Australia’s retirement income system and potentially harming superannuation in a time of global economic volatility.

According to Mr Cooper, our ageing population is also a cause for urgent action.

"We have to stop the politics; we need [parliamentarians] getting on with the job. We need good policy and clarity around decisions being made," he told The Australian Financial Review.

Mr Cooper feels that the “first order of business” should be for Kelly O’Dwyer to define the purpose of superannuation and enshrine it in legislation, in accordance with recommendations from the Financial Systems Inquiry (FSI). Something along the lines of "creating an income stream to replace or supplement the Age Pension".

From there, he believes the Government can push through its policy to impose the $1.6 million cap on total super held in accounts, as well as the lifetime cap of $500,000 for non-concessional contributions.

He says that Labor’s superannuation policy is essentially the same as the Coalition’s, so the policy should pass.

"You can argue the toss about elements of [superannuation policy], but from a policy perspective, it is close. Most Australians would look at that and say that is fair enough, there needs to be some sort of cap on when you should stop expecting a tax concession in order to save," said Mr Cooper.

The wealth management chief says it is imperative that this superannuation package be passed so the Government can focus on creating policy that will help low- to middle-income earners, indigenous Australians and women returning to the workplace.

"That is a burning platform right now," Mr Cooper said. "You need people not only living a dignified life in retirement but one that allows them to participate economically. That requires this Parliament right now to sit down and say what are the policy decisions we have to have?"

Mr Cooper claims that Government policy should focus on helping people become self-sufficient and not reliant on the Age Pension, but this indecision and stalling is making it difficult for people to make voluntary contributions to super.

"You need to stop the tinkering so Australians have trust in the system. Then they can put voluntary contributions in – that is the whole purpose of the cap. But at the moment, with all this ambiguity, why would someone voluntarily put more money in?" he said.

Mr Cooper also welcomes a higher level of scrutiny on our retirement income system to ensure efficiency and healthy competition within the superannuation industry.

"I think that is a critical review, so long as it is independent and looks at the health and sustainability of the system, standing back from industry funds and banks and asking is it stable and allocating money appropriately, is it working?"

He claims that banks are working to better understand the needs of their customers, but the Government has to do its bit to ensure a trustworthy, sustainable future for superannuation and retirement income.

"If banks do a great job and the policy settings are not right, it isn't going to work," he said.

Do you think that the Government’s top priority should be sorting out our retirement income system? Why should this be a priority?

Read more at The Australian Financial Review

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    COMMENTS

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    16th Aug 2016
    10:16am
    Westpac Wealth Management - using your Super money - to increase their shareholder's wealth.
    ex PS
    17th Aug 2016
    11:59am
    Reasons, it could be argued that if your Super is being managed by a major bank, you will probably have shares in that bank. In most cases this is something that you can control through your investment profile. At least that is how my Super works, I guess I can't speak to other Super Schemes.
    Aussie
    16th Aug 2016
    10:24am
    No I do not think so ..... they are more worry about keepimg their jobs and not to look after us
    They are just a seat warmers waiting for their big pension
    Our kids will have a miserable retirement if this uncertanty continues.
    Where is our Bill of Rights to support us and defend us from this uncertant future ?????
    johnny
    16th Aug 2016
    10:43am
    "If banks do a great job". Certainly banks are doing a great job of filling their shareholders' pockets. But not doing a great job for their customers. All banks are ripping off their customers.
    Rosret
    16th Aug 2016
    10:49am
    Ouch. This is a mixed message. "Yes, we want to protect your income stream but if we can force politicians to put a $1.6m cap then any excess will come to us 'THE BANK'." However, young Mr Cooper we, the just retired, have been tricked. We put your money in a private superfund decades ago thinking it would secure our future not be to be a wishing-well for the government. People your age, Mr Cooper, will be seeing this and pulling the money out of the financial bureaucracies as fast as possible. They won't be paying for financial advice and they won't be putting their excess in retirement investment portfolios established for the benefit of hedge funds.
    That $1.6m will be inflated to being a token super portfolio in 10 years. Of course if you are lucky enough to married I would imagine it goes up to $3.2m. I am sure that's lovely for the marrieds.
    Mr Cooper and Mr Turnbull, you have no idea of our financial commitments and family responsibilities. You asked us to manage our money according to the current concessions and laws. I worked out several years ago that the super funds were ripping us off and the only benefit for remaining in the fund was the tax concession.
    If I pull my money out of super it won't be going into the banking system.
    VicCherikoff
    16th Aug 2016
    11:05am
    The lifetime cap is interesting. If the super funds lose money as they did in 2008/09 then it will be impossible to make up the loss if necessary. This will really stuff the plans of many people. What we really need are a similar mutual life insurance package as in the USA and Europe where life policies can be used to build lifetime income through borrowing against the policy payout. We had these in Australia years ago but the corrupt insurance and banking companies colluded to delete the policies reverting to only offering whole of life insurance. Independent mutual insurance companies were trheatening to compete with the mainstream insurance and banking industry players and their loss meant that Australians were cheated of their ability to operate their own banks.

    16th Aug 2016
    11:15am
    Australia - the country with the oldest qualifying age for the pension in the WORLD!
    Retired Knowall
    16th Aug 2016
    6:00pm
    Israel Norway, Iceland, Norway all 67, most others are 65.
    Germany moving to increase the age to 69.
    Australia will have a pension age of 70 for those born after 1965.
    Old Geezer
    19th Aug 2016
    3:48pm
    You can retire anytime you like but you will not be able to access the age pension until 70. So leave work at 60 have a great 10 years crossing of your bucket list and then you will be really to get the pension.

    16th Aug 2016
    11:28am
    Cooper, Turnbull, and Glenn Stevens - all living in an insular world with FA of an idea how old people are battling. This is just more lip service and no follow-up action. This guy would make a good politician.
    Rosret
    16th Aug 2016
    1:04pm
    Yes, it must have taken some skill to write that speech. I guess that's why is where he is today!

    16th Aug 2016
    11:28am
    I agree with the need to define what super is actually for. If it is to replace all or part of an age pension then make that decision and let everybody know as there are too many different opinions now. I believe there is a need to also define how super may be accessed. Defining the purpose will also clear up all those grey areas where super can be used prior to retirement. Whether we agree or not, all of us are living longer than ever before and more and more taxpayers will be needed to provide funds to pay retirees on pensions. It seems logical that provision should be made to make the super system introduced by Keating to supplement the age pension and take the pressure off successive governments having to find funding for pensions. As more and more funds are needed to pay pensions, less and less funds will be available to pay for essential services such as health and education.
    alfie
    16th Aug 2016
    11:56am
    Why don't we have a pension system similar to other countries where you are rewarded for your contributions..... Meaning if you worked and retired then you get a pension of 75% of your average three years. If you never worked then you're only entitled to the basic pension. The system now doesn't encourage people to work. A bum gets the same pension as someone who worked, paid taxes and contributed to society.
    Anonymous
    16th Aug 2016
    12:15pm
    Yes, it's really fair, isn't it?
    Rosret
    16th Aug 2016
    1:05pm
    Agreed.
    Anonymous
    16th Aug 2016
    4:46pm
    Totally agree!
    Old Geezer
    16th Aug 2016
    6:26pm
    So if woman stayed home to look after her kids instead of farming them off to childcare she misses out. Doesn't sound very fair to me.
    ex PS
    17th Aug 2016
    12:08pm
    Good point OG, but I would assume she would be part of a couples payment and would share in the tax paid by her husband. Not ideal but when do we ever see a perfect solution to any problem?
    But one would have to ask, how long does a woman have to stay home with the children, once at school they require no parent input for nearly seven hours of the day. Given that we are supposed to have a flexible workforce, this gives an opportunity for women to engage in the workforce for a good part of their productive working time.
    Old Geezer
    17th Aug 2016
    5:38pm
    If you had 3 or 4 children 6 years apart you could be out of the workforce for quite some time while they were all little.
    ex PS
    19th Aug 2016
    5:54pm
    OG, point taken but a family with more than two children is quite unusual these days.
    Anonymous
    19th Aug 2016
    6:10pm
    I know a woman aged 60 who had eight. Most of my cousins are between 50 and 65 and all had 4 or 5. My son has 4. But I guess we can work on assumptions and averages and stuff anyone who doesn't conform. That seems to be a common approach these days. Why don't we just put everyone in a grey uniform and teach them the Nazi salute?
    KSS
    16th Aug 2016
    12:30pm
    If super should be defined then so should the age pension and settle once and for all the argument of welfare vs entitlement.

    Stop punishing those who worked, scrimped and saved for their retirement and home ownership and rewarding those that didn't and now think they are owed by those that did.

    And if there is to be a state paid pension then it should be at a level that covers basic life needs, shelter, food, utilities and clothing. It should NOT cover holidays, meals out, trips to the theatre and other lifestyle choices. And get rid of the disparity between those that own their own home and those that don't. Downsizing should be a part of that, - removing stamp duty for downsizers perhaps (getting rid of the asset rich cash poor syndrome) but once done, people who own their own homes still have bills to pay that renters don't (think rates, water, strata fees, maintenance none of which renters have to pay) so why the lower pension for homeowners?.
    Rosret
    16th Aug 2016
    1:19pm
    Down sizing doesn't necessarily mean cheaper real estate. The apartment market is far more expensive than the house and garden. The cost of moving i.e. stamp duty and GST is massive. Then you have to say goodbye to your infrastructure of family, friends, transport, medical care etc.
    The last time the idea of valuing assets was considered it caused many premature deaths due to stress and anxiety. Maybe if the opposite was considered - if you upsize and then want to government benefits.
    But this isn't what this article is addressing. The Westpac bank is suggesting we need our already taxed dollars to be taxed again by preventing us from investing our money in super over $1.6m. Any excess money the bank expects will be theirs to invest and the governments to tax. What is wrong with this?
    Its not their money, inflation is going to make $1.6m a bare essential in 10 years and we invested in super on the concessions offered in good faith that this was the right thing to do.
    We had other ways we could have invested.
    Anonymous
    19th Aug 2016
    8:02pm
    I do not agree that a pension should only cover basic needs. The vast majority of lower-paid workers had no opportunity to accrue superannuation and very little opportunity to save. They paid into a fund that was supposed to provide for them in old age. We owe them a comfortable standard of living - not a mere boring, harsh existence. And what about the cost of health care, disability aids, home help when it's required? It's disgusting to suggest people who slogged their guts out for this country for 5 decades should be condemned to a miserable old age.

    And how dare anyone whinge about tax on $1.6 million while condemning those who had far less opportunity to poverty? What a disgrace!
    floss
    16th Aug 2016
    1:34pm
    There are a lot of great comments well thought out but useless if not fordid to your local member.
    Rae
    16th Aug 2016
    2:02pm
    I still don't see how superannuation will provide for retirement and replace the public pension while it is only compulsory for PAYG workers.
    Self employed, contractors and business owners simply don't have to invest for some future date if they can use the money in a better way right now.
    Pretty discriminatory really.
    Alex
    16th Aug 2016
    3:51pm
    This is spoken as if no rules for retirement and superannuation have ever existed. The Government has made and changed rules every few years and appropriated the money collected in its original scheme. Any new proclamations can only be viewed with suspicion.
    Banks and 'wealth managers' have not provided people with any guarantee that their super investments will be safe let alone provide a return and I am not sure they are proposing any method of doing that. Their competition is to see who can earn the most in fees and commissions out of people's investments. His proposed tax increases would certainly be targeted at people on very modest super who would be called 'wealthy superannuaunts' as was the case with the other super and pension changes. The banks could then argue for another tax cut for the wealthy and the Big Four.
    Perhaps Mr Cooper means well but this does not acknowledge the problems there are in planning for retirement and I doubt if he understands them. I am sure he has no worries about his.
    Nomad1946
    16th Aug 2016
    4:04pm
    Maybe the "major banks" could start the ball rolling by reducing the exhorbanent fees they charge for "managing" superannuation plans; and, giving a wider choice of plans and not solely pushing their own product. The increase in wealth is to the income/profits of these banks.
    older&wiser
    16th Aug 2016
    4:10pm
    Funny how it is always the people who are very financially well off who tell people on the lowest incomes how to manage their money
    Anonymous
    19th Aug 2016
    7:32pm
    The overpaid fat cats and silver-spooners are so egotistical that the only way they can live with their conscience is to tell themselves they DESERVE their wealth because they manage money better, and to PRETEND those on low incomes have more than enough to get by on, save and invest if only they weren't so lazy. Lying to themselves has become such an art form that they start to actually believe their own lies.
    sydneysider
    16th Aug 2016
    4:20pm
    all super should industry funds so all profits go to shareholders..i agree that it should be worded to define its purpose and I also agree to a lifetime cap on contributions of 500,000
    This will then not be tinkered with every two years as it is now how are we supposed to know whats happening with our hard earned money
    Old Geezer
    16th Aug 2016
    5:29pm
    If you can have $1.6 million in super you should be able to add $1.6 million. The $500,000 cap is simply a stupid move.
    Rae
    17th Aug 2016
    7:57am
    When that $500 000 can be counted as income when you take it back out I can't see why you would put it in. Put it into shares or bonds or term deposits and it isn't classed as income coming back to you but capital gain and is taxed as such.

    If tax is again levied on super pensions people will regret putting any after tax money in.
    Anonymous
    18th Aug 2016
    4:29pm
    Rae - the idea before the new rules came in was to wash tax out of your super.

    You could take out $540K and then recontribute it immediately using the 3-year bring forward rule.

    Super is only taxed when you die if you are over 60 - but then at 17% at today's tax rates (2% is Medicare levy). To protect your beneficiaries from death tax, you washed $540K out and back in every 3 years. You would then put it back in as separate pension so it did not get mixed with your other super monies which might have tax on them. You can have multiple pensions in an SMSF - but only one accumulation account.

    You just then rinsed and repeated the process every 3 years.

    You can still do the same by taking any taxed pensions out of super - just leaves you exposed to higher taxes. If you know you are dying - that is exactly what you would do.
    Old Geezer
    19th Aug 2016
    3:50pm
    Not sure you can do that as you have to take your super out in the same category proportions as those in your super. You can't just take it out of one category.
    Old Geezer
    16th Aug 2016
    4:41pm
    The flow of money into super has stagnated and it sounds like he is trying to protect his patch to me. That's where the urgency comes into it.
    Rae
    17th Aug 2016
    8:04am
    Blind Freddy could see that if you create a situation where wages stagnate or even decline in real terms and incomes are lowered from investments that there would be a lot less money going around in the real economy.

    Also after the 2016 changes there is not a young person I know still putting extra into super. It was a foolish policy and for the very small gain will continue to eat away at confidence in superannuation and the major political parties.

    No country has used austerity measures to cut pensions and wages successfully so I can't understand why they thought it would suddenly work.
    Old Geezer
    17th Aug 2016
    1:03pm
    Agree people are holding back on contributing to super until they know what the new rules are going to be.

    Personally if I was under 40 I would not be putting any more than I had to into super and by the time I reached retirement age super will change so many times and cold even be nationalised by then. Who wants to save for retirement only to have others benefit from it?
    CarolAT
    16th Aug 2016
    4:46pm
    A pension used to BE your superannuation. You paid your taxes all your life and upon retirement your grateful government gave it back to you in the form of a pension. On this money you could enjoy your retirement if not in luxury, then in comfort. Superannuation was for the wealthy, "the bosses" and virtually non-existent for women.

    Now we're told that we're the greedy Boomers who spent, spent, spent and that we should have saved the half million needed to support even a basic retirement. Oh yes, and while you're at it buy all the kids their own investment property.
    Nomad1946
    16th Aug 2016
    5:18pm
    Hi CarolAT,
    Some 20 years ago Paul Keating introduced "compulsory superannuation" ...... WHY?? Because he knew then that future government budgets would not be able to maintain the Pension as was ... it, the Pension, would need to be "regulated".
    As a "baby boomer" I commenced to put aside additional monies to my superannuation after my three children left the nest and started out on their own.
    I have always and consistently advised my family to commence a "ten year plan" after their 50th birthday .... by increasing their superannuation deposits year by year until their retirement. Because it is my belief that when my children retire (circa 2030) there will not be an "Aged Pension" and to maintain a comfortable lifestyle after retirement this is a necessary and personal duty of care.
    Anonymous
    16th Aug 2016
    8:27pm
    I did exactly the same Nomad. We had people come to my place of work and tell us that as well.

    I chose, as did hubby, to up our compulsory super by 6% each.

    We are very pleased we planned ahead.
    Rosret
    16th Aug 2016
    10:08pm
    Some baby boomers have done very nicely. Many have not. Unfortunately women are the worst affected by the new system as they have either no self funded super or they have very little. Its an incredibly unfair system.
    However this article suggests the Banks are the push behind the governments change to concessional rates making it hard to save a self funded portfolio.
    Anonymous
    19th Aug 2016
    6:07pm
    Why can't government budgets maintain the pension that was promised to all of us? ANSWER: Because dishonest politicians STOLE THE MONEY. There was enough in a pension fund to pay EVERY retiree $500 a week, but they MISAPPROPRIATED OUR MONEY. And now they tell us we should suffer while they keep taking more and more and more for themselves and their rich buddies.

    Some baby boomers have done very nicely. Some had NO HOPE of saving enough to be self-funded, no matter how hard they tried. Disadvantage, crisis, trauma, lack of education, family breakups, disabled children or grandchildren, serious illness... the list of reasons goes on and on and on.

    What is really DISGUSTING is that some privileged folk blame the victims and wish misery on people, accusing them of not trying or of laziness. They have NO IDEA about other people's circumstances, but it inflates their oversized egos to boast about their superior wisdom and condemn those who weren't as fortunate.
    Ruben
    16th Aug 2016
    6:32pm
    Thanks Mr Cooper for being so concerned about superannuation & its recipients. The banks would not be lobbying the government to make changes to super to include taking out a home loan on the equity of your house to pay for your retirement in the event that you blow your retirement super so as not to let the government get their hands on it. Of course like any loan it will have to be payed upon death or selling the house (including the interest of the loan) all off which the monies go back to the bank adding to their buxom profits-surely not -they would not do that?? no no never??
    bob
    17th Aug 2016
    8:52am
    Everybody seems to be missing the point .The limits are not what you can put in but what you can claim as low tax deductions.I suspect a lot of people whinging on this forum are more worried about their tax benefits than their accounts.Wish I could put $1.6m into super and then complain.
    ex PS
    17th Aug 2016
    12:16pm
    Over the past decade the populations trust that Super is a good investment strategy for retirement has been eroded. This is partly because of changes that have been made that have decreased the benefits at the collection stage and mainly because successive governments have tried to make retrospective changes to a system people have relied upon for long term retirement planning.
    People need to be confident that when they sign up to a long term investment strategy they will not have to contend with greedy politicians tinkering with the system in order to solve short term budget problems, the Super Scheme you first sign up for should be the one you get upon retirement, unless you and the providor agree to the changes.
    jamesmn
    25th Aug 2016
    11:09am
    maybe the first step to fix it would be with the politicians super what they get is outright ridiculous they are not worth that much or else bring all working Australians into line with them Morrison is nothing but a clown he wants all fair working Australians to have cuts everywhere but not touch the politicians pay