28 August 2017
Australia’s ageing population, the federal deficit, commonwealth net debt approaching $350 billion and a vast welfare bill make retirement incomes and superannuation one of the nation’s most contentious and politically sensitive issues. Sooner or later it touches every voter’s hip pocket — and all political parties are acutely aware of the potential of grey power to swing election results in marginal seats.
On the positive side, 25 years after the introduction of compulsory employer superannuation contributions, the share of retirees on full pensions is falling. Yet 80 per cent of Australians still retire to at least a part Age Pension or benefits, a position the 2015 Intergenerational Report warned would barely change in the next 40 years.
Conscientious savers planning to be independent in retirement have been frustrated by years of tinkering with the system that has undermined certainty. Most recently, the Turnbull government incurred their wrath when it capped contributions for high-income earners and cut the over-50s concessional (before-tax) contributions cap of $35,000 to $25,000 from July 1.
Revenue and Financial Services Minister Kelly O’Dwyer has promised the government would not make any further changes to superannuation taxation. That remains to be seen. But her pledge to focus on governance of the $2.3 trillion pool of superannuation savings must be followed through to improve oversight of members’ funds.
Since 2004, the value of super assets has more than tripled yet the average annual fee as a percentage of assets under management has barely fallen. Last year, it was still more than 1 per cent. That’s more than $20bn a year in fees — about the same as the defence budget — and double what is feasible.
Two months ago, readers focused on retirement were disillusioned by the revelation in this newspaper that a homeowning couple with $400,000 in super, when combined with the Age Pension, could be better off than a couple with $800,000 to $1 million in super, whose assets precluded them from receiving a part pension.
As citizens of a rich nation, Australians deserve a generous social welfare safety net, but the unpalatable truth is that the current system, one of the most generous in the world, is unsustainable. Social security spending, accounts for more than a third of the federal budget, 35.3 per cent. Over time, budgetary pressures should force this or future governments to tighten Age Pension eligibility rules, which is why incentives for workers to save as they aspire to comfortable retirements must be the focus of government policy.
Maximising workforce participation, and therefore increasing retirement savings, and reducing dependence on unemployment benefits and the Disability Support Pension, is also vital. That’s one reason the Turnbull government, staring down hostile reactions from Labor and the Australian Medical Association, has made the right decision to launch a drug testing trial among 5000 new recipients of Newstart Allowance and Youth Allowance over two years in western Sydney, in Logan, south of Brisbane, and in Mandurah, south of Perth.
The aim is not to stigmatise, shame or punish drug users but to help them overcome their problems and secure work. As Human Services Minister Alan Tudge says, about a quarter of unemployed people took drugs last year, with ice usage about 2.4 times higher than in the general community. Such problems, as he said, effectively exclude the unemployed from many jobs. Under the trial, those returning positive tests will be put on to cashless welfare, which limits the amount people can withdraw in cash — a system with a proven track record in limiting substance abuse.
After a second positive test, recipients would have to see a doctor, at government expense, and undergo treatment in order to continue receiving benefits. It is beyond contention that such an approach would serve the best interests of the unemployed as well as taxpayers, whose largesse is not a bottomless bit.
Emphasis added by Save Our Super