With the Federal Budget having delivered little more than some revenue-oriented tinkering to the financial services environment, a good deal of attention is now being focused on what might or might not be delivered as a result of the recommendations flowing from the Henry Review of Taxation.
And among the issues raised by the Henry Review is the superannuation preservation age and the suggestion that, in similar fashion to the review’s recommendations on the age pension, the preservation age for superannuation be lifted to 67.
Importantly, the Minister for Superannuation and Corporate Law, Senator Nick Sherry, has not dismissed consideration of lifting the superannuation preservation age out of hand. Rather, in the face of media speculation, he has suggested that the matter will not be considered by the Government before the end of the year.
If Senator Sherry is wise, he will ensure that the superannuation preservation issue simply slips off the policy agenda. Politically and economically, any strategy involving lifting the preservation age to 67 has about as much chance of gaining take-off velocity as a brick-and-tile 747.
Quite simply, any tampering with the superannuation preservation age would represent a fundamental breaking of faith with every Australian fund member who has viewed their superannuation contributions as a means of underwriting a more comfortable retirement at a time of their choosing.
If Sherry and the Prime Minister, Kevin Rudd, had any doubts about the acceptability of tampering with superannuation preservation arrangements, they ought reflect upon the views expressed by former Treasurer and Prime Minister Paul Keating and the former ACTU secretary, Bill Kelty.
Keating and Kelty are viewed as being the major architects of Australia’s current superannuation system because they were the major players in the negotiation of the so-called Prices and Incomes Accord, which represented the central pillar of the Hawke/Keating Government’s wages and incomes compact with the trade union movement.
Asked to comment on the proposition that the Rudd Government might look to change the preservation arrangements, Keating and Kelty made plain that they believed such a move would wreck the system as it was originally conceived.
Kelty, for his part, said it had originally been agreed that “superannuation wasn’t simply a substitute for the old age pension” and added that raising the preservation age would be “an abrogation of the fundamentals” on which the retirement system was built.
Most Australians would probably find themselves agreeing with Kelty and Keating, particularly those people who are now in their late 40s or early 50s and actively considering the best strategies for a comfortable retirement.
In circumstances where the Government has already wed itself to the proposal to lift the age pension to 67, Rudd and key members of his Cabinet need to consider the reality that notwithstanding the increased longevity of Australians, most want the option to retire at around 60 or 65 and to use their superannuation to fund that retirement.
As Keating said, “Were superannuation to be seen simply as some kind of substitute for the public pension, then the essence of it, the salary sacrifice in it, would be pointless. This is why the superannuation access age is already lower than the pension age of 65”.
Any examination of the core recommendations of the Henry Tax Review reveals that it has brought very little to the table by way of policy innovation. In such circumstances, the Rudd Government needs to be careful that it does not end up breaking something that never needed to be fixed.
– Mike Taylor
