In an opinion piece for the Herald Sun today, former federal treasurer Peter Costello has taken a shot at our superannuation system, suggesting governments need to focus more on where super is invested, rather than threaten higher taxes.
The first two weeks in January have not been kind to the stock market, with an eight per cent fall in the Australian market and similar decreases felt around the world. So far in 2016, the Australian and US stock markets have experienced the worst start to a calendar year, ever.
Following on from this point, Mr Costello asks this question of the readers: “So what kind of crazy-brave person has been putting new money into the stock market during the period it has been falling like this?” His answer: “Practically every working Australian.”
While there are some working Australians who hold their own self-managed super fund (SMSF) or are rigorous about changing the setup of their super fund, most average working Australians have their superannuation paid into shares by default.
Mr Costello points out that while governments show great interest in legislating the amount that can go into your superannuation, and even greater interest in taxing that money, they fail to show anywhere near enough interest on what happens to those funds once they are paid into the account.
According to Mr Costello, there is a lot of fear and speculation around potential changes to the superannuation system and changes to tax and contribution rules. He believes that if the Government wants to extract full income tax on super contributions, people should be able to opt out of the system altogether.
Finishing off his opinion piece, Mr Costello said, “Our stock market is still 30 per cent below its level of eight years ago. There’s a lot of lost years for people to make up and a lot of lost wealth. You can see why people prefer to put their voluntary savings in less volatile assets like residential housing. They’re more careful with their money than the Government is.”
It may not feel like it, but we are most likely just several months away from a Federal Election. The single biggest issue for older workers and retirees heading into the next election is undoubtedly the future of the superannuation system and the knock-on effects to the future of the Age Pension.
It was interesting to read Mr Costello’s column in today’s Herald Sun where he highlights flaws in the current superannuation system in regards to the average Australian worker.
Unfortunately, his statement taking a political shot at super funds, “for most people it is an industry fund set up by unions and employers…”, is factually incorrect. According to the Association of Superfunds of Australia (ASFA), most assets and accounts are in the retail sector, not industry funds.
It is also disingenuous to criticise ‘Canberra’ when Mr Costello’s own policy, as then Treasurer, was to stall super contributions at nine per cent for years, resulting in far lower balances for most working Australians today.
However, Mr Costello is correct about one thing: there are a lot of unknowns and concerns from older Australians in regards to the superannuation system currently, with no certainty of future changes if another government gains power.
And yes, for the superannuation system to succeed, all political parties need to agree on, and secure, the future of super so that Australians can plan their retirement without the worry of significant future changes.
What do you think? Did Mr Costello raise some valid points? Is superannuation the single biggest issue for older workers heading into the next election? Do default superfund allocation models need to be reviewed?