Superannuation is the main driver of a decent retirement and the upcoming budget should deliver policy stability to ensure consumer confidence in the system, according to the Association of Superannuation Funds of Australia (ASFA).
ASFA CEO Dr Martin Fahy said superannuation, like universal health care and free education, was an unqualified human good and a proven, outstanding public policy initiative.
“Super is lifting Australian retirement outcomes and supporting fiscal sustainability, helping reduce unfunded pension liabilities,” he said.
“Superannuation Guarantee (SG) payments have considerably enhanced the retirements of an increasing number of Australians, with a 40 per cent increase in the real level of average income at retirement since 1992.
“Australia leads the world in the sustainability of our pension system. Thanks to super, we have the lowest spending on pensions as a percentage of gross domestic product of any Organisation for Economic Co-operation and Development country and this will continue in the decades ahead.
“Super also drives the financial system in infrastructure and nation building and underpins the stability of the banking system with banking deposits.”
In the lead up to the 2017 budget, ASFA is calling for stability in super policy settings and several modest but affordable enhancements including:
- enabling the Australian Taxation Office (ATO) to reunite lost super accounts to a member’s active account to ensure consumers get the benefit of compounding and thousands of extra dollars in retirement;
- providing $10 million per year extra to the ATO to undertake audits to improve SG payment compliance by employers;
- including unpaid SG entitlements in the definition of unpaid employee entitlements for the purposes of the Fair Entitlements Guarantee to help employees get their correct SG entitlements;
- providing capital gains tax (CGT) relief for mergers of super funds to remove a potential barrier to mergers; and,
- providing adequate resourcing for the Superannuation Complaints Tribunal (SCT) and a one off payment to enable the SCT to deal with its current backlog of complaints.
Dr Fahy said a period of consolidation for the super industry would enable the various changes made in the last budget to be accommodated.
“As the super system heads towards maturity, aligning any further changes to both super and the age pension to the five year Intergenerational Report makes sense,” he said.
“We have a retirement income system ranked as third best in the world, but if government strengthens its commitment to super and reflects public affection for the scheme, then Australians can still have the best future in the world for its retirees.
“Lifting the rate of SG is important for sustaining the super system and ASFA will continue to advocate for this fundamental improvement for the system.”
In relation to housing affordability, Dr Fahy said that given the right settings, superannuation funds could provide patient capital and improve market conditions.
“Internationally, pension fund investment in residential housing is more common and we would be supportive of the government exploring options to develop the market for this in Australia,” he said.
“There is potential for Australian funds to provide high-quality, affordable supply with greater certainty of tenure for renters.
“Superannuation has a long-term investment horizon, so access to a diversified, visible and consistent rental income stream is appealing on the face of it.”
However, Dr Fahy said the current return profile of the sector makes it largely unviable for funds, who seek the highest possible, risk-adjusted returns for their members.
“Capital gain expectations entice ‘mums and dads’, however high prices and low yields have proven a poor recipe for attracting professional investors with fiduciary obligations,” he said.
“To unlock institutional capital and re-shape the market, policy changes are needed that improve risk-adjusted returns for these investors.
“Land tax exemptions, making public land available at a discount to market value and contributing to the development of public space and amenities are examples of steps that could be taken to encourage institutional investment and increase suitable market supply.”
Dr Fahy said ASFA is supportive of proposals to develop an affordable housing bond aggregator model and improve incentives for retirees to downsize their family home.
“To encourage Australians to live better in retirement, we need to think about how we monetise the family home in a considerate fashion,” he said.
“Innovative public policy settings that improve incentives to downsize should be applauded.”
For further information, please contact:
Teresa Mullan, Media Manager, 0451 949 300.
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. ASFA’s mission is to continuously improve the superannuation system so people can live in retirement with increasing prosperity. We focus on the issues that affect the entire superannuation system and represent more than 90 per cent of the 14.8 million Australians with superannuation.