The super system is not broken but can be improved: ASFA

In its supplementary submission, as part of the tax reform consultative process, the Association of Superannuation Funds of Australia (ASFA) has concluded there is no urgency to make changes to the superannuation and retirement income system today as it is sustainable.

The system has been adjusted continuously over the last few years, and while ASFA supports the continuous review of the system, changes must be discussed and implemented with appropriate notice.

“The key objective of the super system should be to provide a steady income stream for all Australians in their retirement,” said ASFA CEO Pauline Vamos.

“ASFA’s further submission focuses on several key ways for the system to achieve these objectives. These include moving to 12 per cent Superannuation Guarantee contributions as soon as possible, maintaining the Low Income Superannuation Contribution after 2017, broadening the coverage of superannuation, and providing beneficial social security treatment for at least some retirement income streams.”

For the superannuation system to meet its purpose, it must be universal and cover all working people.

ASFA has identified a strong policy case to extend the compulsory superannuation regime to include some, or all, of the self-employed. Nearly 10 per cent of the current labour workforce are self-employed, and it is likely that the majority of these workers will find themselves without business assets sufficient to support a comfortable standard of living in retirement.

“We cannot ignore the large proportion of self-employed Australians who are putting off planning and saving for their retirement,” said Ms Vamos.

“While many self-employed workers believe their business will serve as their superannuation, this is not always the case. Many of the self-employed do not have significant business or financial assets, and they may face problems retaining the standard of living they are accustomed to when they reach retirement age. We are particularly concerned for those who are being forced to move to a contractor, rather than part-time worker model.”

ASFA also recommends the social security system provide incentives for income streams offering long-term longevity protection.

“In order for the superannuation system to achieve its key objectives, we need better integration between superannuation income streams and the provision of the Age Pension,” explained Ms Vamos.

“In this context, there should be favourable social security treatment for people who use, at least, part of their superannuation to take up an income stream that will last throughout retirement. Supporting this behaviour is an investment for the future, delivering better retirement incomes for older retirees and reducing the future call on the Age Pension,” concluded Ms Vamos.

The supplementary submission is available here.

ASFA’s initial submission to Treasury is available here.

About ASFA

ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.