Save Our Super believes that major changes to the existing rules of the Australian superannuation system should not be made unless, at the same time, grandfather clauses are included in the legislation. However, the Government and the Opposition (to a lesser extent) propose to introduce such changes without grandfather clauses.
“Grandfather clauses” are qualifying clauses within legislation which exempt those people already involved in the activity with which the legislation deals.
Budget 2016 Proposals and Opposition’s Policies
Save Our Super believes that grandfather clauses must be provided to protect all significantly affected Australians from a number of the Budget 2016 superannuation proposals and from a number of the Opposition’s superannuation policies.
Reserve Bank of Australia and Productivity Commission on grandfathering
There are many examples of Federal Parliament’s use of grandfather clauses when major changes were made to the superannuation system. For example:
in a September 1996 Research Paper, the Reserve Bank of Australia said:
“Important changes to the tax rules were made in 1983, 1988, 1992, and 1996, which generally reduced the tax benefits to superannuation, although the treatment remained concessional. … Changes were generally grandfathered at each stage, so that retirees would receive benefits taxed under a variety of rules depending on when contributions were made.” (p 9); and
in a July 2015 study, Superannuation Policy for Post-Retirement, the Productivity Commission said:
“Australia’s superannuation system has been subject to regular policy change since its inception (chapter 1), and those people significantly affected by major rule changes have generally been afforded grandfathering provisions that maintain their previous entitlements.” (p 101).
Grandfathering Justified In Proposed Legislation
The historic use of grandfathering to protect those who were significantly affected by major superannuation rule changes, justifies its use in the proposed legislation.
Unfair and Unreasonable
It is manifestly unfair and unreasonable to individuals who now, or will, rely on their superannuation savings for a retirement income to make new rules which significantly affects them by penalising their actions taken in good faith, encouraged by the Government, under the then existing rules.
Therefore, appropriate grandfather clauses need to be put in place to protect all affected Australians.
A Government’s right to govern is based upon the bond of trust between the people and their Government. Trust is the currency of Government. When, by a breach of trust, a Government debases that currency, the people lose confidence in their Government.
And so it is when Governments make major rule changes to an existing superannuation system. If, as above, as a consequence, they penalise actions people had taken based on the then existing rules, without also providing grandfather clauses, Australians will lose faith in the superannuation system.
Those who will lose faith include the millions of Australians who are effectively compelled by the Australian Compulsory Superannuation Scheme to place their trust in the Government.
Furthermore, those who are yet to enter the superannuation system need to be assured, before they commit their savings to the superannuation system, that they can trust Governments to always treat them fairly and reasonably.
Superannuation – A Long Term Savings Plan Under Threat
Australians’ investment in superannuation is an almost life-long savings plan. It starts from the first superannuation contribution and lasts until the final pension payment.
In 1991, the Superannuation Guarantee levy was imposed. Australian’s participation in superannuation has accelerated from about 30% of employed persons to over 90% today.
Since the 1980s, Australia’s accumulated superannuation savings have risen from an amount equivalent to about 30% of GDP to about 120% of GDP today.
Over time, as more Australians contribute more super funds for longer proportions of their working lives at higher rates, average superannuation balances at retirement should continue to rise.
However, that growth is threatened if appropriate grandfather clauses are not included in superannuation legislation.