H.L. Mencken once wrote that “for every complex problem there is an answer that is clear, simple, and wrong”. But when it comes to superannuation, the clear and simple answers are still wrong but also plentiful and often repeated. And not just the solutions, but the indulgent cliché compliments.
The key problem with superannuation policy in this country is that it long stopped being about retirement policy. It is now about tax policy, industrial policy, trade policy and many other policies generally unrelated to managing the cost and consequences of an ageing population. Superannuation policy, rather than being about actual workers and retirees, is now about managing the lazy and obese 28-year-old living in a dysfunctional, but exceptionally well-appointed house on the water, with two parents who hate each other.
Writing recently in the Australian Financial Review, former Rudd-Gillard-Rudd government minister, Craig Emerson wheeled out the oft-quoted but never substantiated trope that “Australia’s retirement incomes system is the envy of the rest of the world.”
So, who envies this system? Well, the North American and European banks, accountants, lawyers and other ticket clippers envy their Australian counterparts who have this giant, guaranteed and growing fee base that they can gorge over. What do citizens and retirees think of Australia’s retirement incomes system? Our Kiwi cousins across the ditch voted 92% against in a 1997 referendum on the question of whether to implement an Australian style compulsory retirement savings scheme.
But when it comes to simple solutions that will offer sound and fury delivering next to nothing, one needs to read the writings of Senator Andrew Bragg. Writing in these pages recently, Bragg decided to take up the issue of industry fund governance and remuneration. Senator Bragg writes:
Take super fund boards – they are big, bloated and expensive.
Cbus and First State Super each have 15 directors. AustralianSuper, HESTA and NGS Super are all just one behind 14.
Meanwhile, Coles and QBE have almost half — eight directors — while CommBank, ANZ and Woolworths have just nine.
Why is it that ‘not-for-profit’ super funds require almost twice as many directors as the ASX’s largest and most complex companies? Simply because it means more snouts in the super trough.
Fair questions to ask. However, the Chairmen of CBUS, AustralianSuper and HESTA each earned $172,000, $253,000 and $97,000 respectively last year. In contrast, the Chairmen of QBE, CommBank and ANZ each earned $790,000, $885,000 and $660,000 respectively last year. There may be more snouts in the super trough, but the trough is smaller, much smaller. The problem is not the number of snouts in the trough or the size of the trough. The problem is that there is a trough.
Bragg’s next target is Industry Fund director terms where he identifies a number of fund directors who have been on fund boards for more than 20 years. But is not a better test of director effectiveness the actual returns delivered by the funds rather than director tenure? Unfortunately, Bragg offers no analysis on this. However, he writes:
But why let tenure suggestions get in the way of a substantial salary? The industry is riddled with people who have as much regard for maximum tenures as they do for the workers they represent.
If it is the genuine view of Bragg that there should be term limits for fund directors so as to better represent the workers whose funds they oversee, I for one look forward to Bragg also advocating for parliamentary term limits, after all, “why let tenure suggestions get in the way of a substantial salary”? Perhaps Bragg also have a quiet word to his Liberal Party colleague Kevin Andrews, the father of the house, who has been continually in Parliament for over 29 years, a longer tenure than any of the fund directors Bragg identified.
Retirement policy in Australia is an exceptionally serious challenge, some might say a wicked challenge, and more so in a post-COVID world. The challenges of Australian Superannuation policy cannot be addressed through simple-sounding reforms that do nothing more than generate newsprint and burn political capital.
Much like education policy should be about students and not schools, the starting proposition for an Australian retirement policy be citizens and retirees and not the superannuation management and administration industry. It should be about ensuring a dignified retirement for Australians and not how to optimise tax revenues or how to reward or punish political opponents.
To quote Anthony Albanese plagiarising Michael Douglas in the movie The American President:
In Australia, we have serious challenges to solve and we need serious people to solve them.
Dear Senator Bragg. Please get serious on this issue.
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