Did you hear the sound of champagne – the good sort – corks popping on the evening of 21 May as it became clear that the days of the satanic Morrison government were over? They were coming from the posh parties being held by members of the industry super funds club. (Of course, some of them might have been down at Labor HQ or individual Labor member functions.)
The arch-enemy of the system of compulsory superannuation had been defeated. Hip-hip-hooray and particular good riddance to Andrew Bragg, Tim Wilson and that annoying woman, Jane Hume.
The industry super funds’ rightful and protected place in the highly lucrative funds management game has been saved, unlikely to be threatened in the future. Praise the Lord of that enforced flow of savings to the funds, otherwise known as the system of compulsory superannuation.
And did anyone say 12 per cent? On reflection, surely that 12 per cent of workers’ pay required to be directed into superannuation looks a tad low. 15 per cent sounds better. A word or two to Chris (Bowen) or Jim (Chalmers) or Bill (Shorten) should do it. Rope in a few well-connected lobbyists – and pay them handsomely using members’ funds – and Bob’s your uncle.
Acknowledged father and chief defender of the system of compulsory superannuation, Paul Keating, emerged post-election with his usual spray of insults. He targeted Josh Frydenberg and a number of other Liberal parliamentarians who had ‘barracked’ for first-home buyers accessing their super. (It’s not even clear that Frydenberg was a big fan.)
Before discussing this extremely late-in-the-piece proposal from the Coalition to allow first-home buyers to use up to 50 per cent of their superannuation balances as a home deposit, it is worth running through the Coalition’s longer-term attitude to compulsory superannuation. In a word, it has been feeble. In two words, it has been pathetic and gutless.
Whatever its original intentions – a tawdry wage deal with the trade unions and a mistaken effort to increase domestic saving – it is very difficult to defend our system of compulsory superannuation. It has clearly failed in what should have been its principal objective – to reduce the fiscal costs of the age pension. Indeed, because the costs of the tax concessions are so high, the system is actually a net negative for the budget and will be for many years.
Don’t get me wrong – there are beneficiaries of the system. Plenty of middle- and high-income earners have done very well, amassing very large balances that are favourably taxed. A massive industry has evolved around the compulsory flow of funds and this has been a boon to the union-controlled industry super funds. (A few crumbs are also handed out to the toadying employer associations.)
It matters a great deal less to the trade unions that rates of unionisation have fallen in virtually a straight line for the past three or so decades because their power and financial status are enhanced by dint of these industry super funds. In turn, it’s hardly surprising that these funds, as major holders of listed and unlisted assets, have increasingly sought to flex their muscles to alter corporate decision-making – by insisting on the adoption of Environment, Social and Governance (ESG) principles, for example.
At the same time, the weak regulation of super funds has meant there is next-to-no accountability to the actual members. The trustees of the funds are not appointed by the members but rather are nominated according to murky club ‘rules’. These positions are particularly favoured by former Labor politicians who are often laughably described as ‘independent’.
There is little doubt that, deep down, many Coalition parliamentarians have misgivings about super. After all, the power of compulsion should be used by governments as sparingly as possible and the case in this instance is very weak. But principle aside, there is also no doubt that many fear the backlash from any policy initiatives that do not find favour with the industry super funds. In other words, most of them have been more than happy to hoist the white flag.
To give him his due, Tony Abbott when he was the prime minister had the courage to pause the increase in the Superannuation Guarantee Charge, much to the chagrin of the super industry.
But when it came time to lift the rate again – from 1 July 2021 – the Morrison government was too afraid of the political reaction of the industry super funds of continuing the pause and merely waved through the 50-basis point increase.
To be sure, the Coalition government did a bit of tweaking of the super system during its terms of office between 2013 and 2022. After all, it commissioned the Productivity Commission to take a look at the entrails of the system.
The major conclusion was that many superannuation savers are dudded by high fees and charges, by being forced to change funds and because of poorly performing funds. Many individuals in their early thirties have little to show in their super balances after years in employment. Their contributions are effectively gobbled up by the funds and insurers.
(The PC report contained a bizarre proposal to create a ‘best in show’ list of super funds to which new members would be simply allocated when they didn’t make an explicit choice. This would have massively favoured the industry super funds. The proposal was never acted on.)
With this ammunition, you’d think the Coalition government might construct a comprehensive agenda that would allow members to have more freedom to direct and access their savings.
Instead, encouragement of fund amalgamations and the outing of poorly performing funds were the major ‘achievements’, although the insistence on fund stapling – members only now change funds with their consent – was a useful last-minute success. It’s unclear whether this latter change will survive a Labor government, however.
So what was the real lowdown on that Super Home Buyers Scheme floated by Scott Morrison at the party’s launch one week out from the election? If it were a good idea – and there were many points in its favour, including the importance of home ownership before super saving – it should have been floated many months before – at the least.
The truth is that there were so many scaredy-cats in the parliamentary party that there was plenty of internal opposition to the proposal. It is now dead, probably forever. The behemoth that is the superannuation industry will not be trifled with.
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