TUESDAY, 6 APRIL 2021
SUBJECT: Scott Morrison’s broken super promise.
ROD HENSHAW, HOST: Well concerns have been raised about the Federal Government's plans to overhaul the superannuation sector. The proposed changes aimed to create greater accountability across the industry and ensure Australians retire with more money. But concerns have been raised by Labor MPS and the superannuation industry over the proposal to allow the Treasurer powers to block investment choices by funds. Now the Government is also considering dropping the proposed increase to the superannuation guarantee following an independent review Into the nation's retirement system. Stephen Jones is Shadow Minister for Financial Services and Superannuation is with me on the line now. Stephen, good afternoon. Thank you for your time.
STEPHEN JONES, SHADOW ASSISTANT TREASURER: Good afternoon, good to be with you.
HENSHAW: Are there any positive parts to the superannuation reforms that you can see from your side of politics?
JONES: We are 100 percent in support of provisions which will improve the performance of funds, weed out under-performance, decrease fees and give a better retirement balance for fund members. That's what the bill says it's about. The problem is that when you read through the detail in many instances, it does the exact opposite. We want to work with the Government to fix these problems. But at the moment, they're not showing any willingness to want to fix what many within the community, not just Labor, not just the funds themselves, but many within the community are saying are significant problems with this legislation.
HENSHAW: Where is the legislation out of the moment? Is there any wiggle room, how much wiggle room Is left before it actually goes to the big vote?
JONES: It was introduced into the House of Representatives. It's been referred off to a Senate inquiry. I think the Senate inquiry will throw some sunshine, a spotlight, onto the obvious deficiencies with the bill. It'll point out that the fund actually gives a green light to superannuation funds, bad funds, to increase their administration fees. It will point out that it'll provide some perverse disincentives for funds to invest in Australian infrastructure. And in fact, it'll make more sense for funds to invest in infrastructure in America or in other countries than here in Australia, which is just crazy. And finally this bizarre power that the Treasurer wants to give himself to cancel the investments made by trustees in good faith because the Treasurer doesn't like them. I mean, it's bizarre. We can find no other example where in peacetime a Government has said they're going to cancel an investment decision of a private corporation.
HENSHAW: Okay, well the question there Stephen is why should the Treasurer not have the power to block investments if they're not in the best interest of the customer? Are they being overprotective, do you think?
JONES: No, in fact the power sits on its own. It's not restrained by the best interests of the fund member. It's a power for the Treasurer to cancel any investment that he doesn't like, and it's absolutely bizarre. It’s not just Labor who are saying this. The Law Council of Australia have pointed this out. The Business Council of Australia is deeply concerned about it as well. In fact, everybody has looked at it says this is bizarre. It's completely disproportionate to any problem that they want to fix. And yet the Government wants to proceed with it. We're saying pull back. Do not. We actually want to support legislation which will improve fund performance. This does not do it.
HENSHAW: So why are they considering stopping the super guarantee increase? What's the rationale behind that from your perspective once again?
JONES: The Government seems to think that 9.5 percent is enough for average Australians. We disagree.
HENSHAW: You want 12 percent do you?
JONES: Yeah, that's right. The average Australian women is retiring today with about $118,000 in her retirement savings. The average Australian male about $180,000. That's not enough. That's not nearly enough given that we're living longer. Health costs and other costs are going up. So, we simply have the proposition why is 15.5 percent enough for politicians with 9.5 percent the same to be adequate for the people for average Australians? It's just not fair.
HENSHAW: Well I thought, and correct me if I'm wrong, which I think I probably am, but I thought that it was legislated the 12 or 12.5 percent would come in by a certain date?
JONES: Spot on. It moves from 9.5 to 10 percent under the current law. The Government will have to change it if it doesn't want this to happen. Nine-and-a-half to 10 percent in on the first of July this year and then in point five percent increments until it hits 12 percent every year thereafter.
HENSHAW: Okay, that is legislated, that's locked in, well to quote Paul Keating isn't it who said its L-A-W law.
JONES: That's right. So It was actually legislated in 2012, introduced by the Rudd Government, legislated by the Gillard Government delayed by the Abbott Government for 10 years. So due to kick in again now after a 10-year delay. And if it's delayed or cancelled again, that'll be further injury to average workers. They'll be as much as $100,000 worse off if it's delayed again.
HENSHAW: Stephen what do you think about the Government's, during the lockdowns and the height of the covid crisis if you like, there was concern that young people have been ripping into their super because they were allowed to. They could take $10,000 out and another $10,000 from memory from their superfunds, not necessarily for emergency purposes.
JONES: Deeply distressed. Deeply distressed by that. Yeah.
HENSHAW: Yeah. Should they have done that? Or should, I mean, where do you stop? Where do you stop people's rights and where do you begin being over-protective and all the rest of it? And should they be, I suppose to really drag out the question, should it be some kind of okay you prove that you need it for emergencies purposes and we'll have a look at it?
JONES: That's the way it works under the normal law. And it's important to remember that superannuation is treated different from just about every other money, and every other saving. It’s concessionally taxed on the way in, its concessionally while its earning investment income while it's in superannuation fund and then concessionally taxed, in some instances tax-free, as it’s withdrawn at retirement. So it's treated, given a privileged status. So those people who are saying it’s your money, should be able to do without it, don't take account of all of the ways that their money is treated differently. That's the first point of I’d make. But the biggest point is this. If the Government was encouraging people to raid their super, instead of looking doing what most Governments around the world are supposed to do during a downturn and that's provide support, that is creating an enormous burden on that individual. Somebody who withdrew $20,000 during the pandemic is probably about $120,000 worse off by the time they hit retirement. That's the most expensive pair of sneakers they’ve ever bought.
HENSHAW: It’s a nice car though.
JONES: Or the most expensive car they've bought in their entire life. They might have got a Toyota but paid for a Maserati. So it hurts the individual but it also hurts the taxpayers because that's more pension reliance we're going to have down the track as well.
HENSHAW: Okay. So how do you see this going through? Taking into consideration and in summary your concerns, well I mentioned wiggle room before. I guess it's a case of putting it in the House and seeing if you get the amendments through? What are your chances?
JONES: Two things. Like, the Government has got affirm the commitment it made prior to the last election and that commitment was we’ll keep the 12 percent. We won't change that. So we need a big tick on that one. And the second thing we need to do is work collaboratively. We want to reduce fees, we want to improve performance, we want to get underperformers out of the industry so the people retire with more money. That's a joint objective.
HENSHAW: Yeah, there’s not too much argument there from the Government side is there?
JONES: Who could be who could be against that?
HENSHAW: Yeah exactly.
JONES: Who could be against people having more money at retirement and better performing funds? We're all for it. Let's look at legislation which will achieve that objective. We're up for it.