Is the Govt building to far-reaching superannuation changes?

25 May 2020

The Federal Government has added to superannuation industry concerns that it is looking to far-reaching changes in the post-COVID-19 environment, with the announcement that its deferring plans to introduce the Retirement Income Covenant from 1 July. 

The announcement comes on top of the Government’s deferral of its Retirement Income Review and comes at the same time as a number of back-benchers continue to advocate for a far-reaching review of the superannuation regime including compulsion and as the Government’s hardship early release regime continues to play out. 

Announcing the deferral of the Retirement Income Covenant, the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, said it was necessary to allow continued consultation and legislative drafting to take place place following the Coronavirus crisis. 

Related News:

She noted that superannuation laws currently require trustees to formulate, review and give effect to investment, risk management and insurance strategies. The purpose of the Retirement Income Covenant is to establish an additional obligation for trustees to formulate a retirement income strategy for their members. 

Hume said deferral of the Retirement Income Covenant would allow drafting of the measure to be informed by the Retirement Income Review. 

“We’ve been working for some time on a Retirement Income Covenant. While efficient accumulation is imperative and we are steadily chipping away at the inefficiencies of that part of the system, we need to build a smoother transition from the accumulation to the de-accumulation phase,” she said. 

“Of course, there is nothing stopping funds and their trustees from developing retirement income strategies now and we’d encourage them to do so.  Trustees don’t need to wait for us to legislate the Covenant.” 

A number of Government back-benchers have been questioning the rationale underpinning the existing superannuation system and have raised the issue of compulsion for younger, low balance members. 

At the same time, some superannuation executives have expressed concern that the current hardship early release regime may represent the thin end of a wedge for the Government’s long-term policy approach to superannuation. 




Recommended for you

Author

Comments

Comments

If people are given the choice to take the 9.5% in their pay packet, or let it go through to super, it will be a massive vote winner and deliver a huge boost to the economy. Labor wouldn't back it, because of their industry fund masters. So the coalition would win the next election in a landslide. They would also raise enough tax to pay out of the Covid19 debt and the ALP/union funding industry funds will be smashed. It makes so much sense I could seriously see it happening.

Good argument. Hope your right.

Good thinking Jamberoo. Personally I can't see them making super optional for everyone, but perhaps for the under 30's? Given that most under 30's normally vote Labor, it would still win the Libs a lot of votes, but without impacting the current super system too greatly.

I note there are proposals currently being circulated for private health insurance, to allow children to remain on their parents' family policy up until the age of 30. Seems like 30 is the new age for becoming a responsible adult!

I hope that we don't become subject to 'long-term blindness'. The impacts of Covid-19 are far reaching, but for young people today, what will their retirement look like if they have no super. These are the people less likely to die from coroanvirus and have long and productive lives to live. Equally, Trustees should get on with the job of better looking after their aging members - there is no need to wait for governments, who are often a handbrake. Get on with it super fund directors.

When given the choice I opted out of super. I chose to pay myself dividends instead of salary to specifically avoid the superannuation system. Sure I pay more tax but I have reduced my legislative risk exposure. It's a choice I've made consciously and as a financial adviser with over 20 years experience I know the superannuation system very well. I know how much it changes and how much of a carrot it is for the wrong over-spending, overreaching government. I've assisted a number of younger business owners to understand the same dynamic. As we age and get closer to 60 we will look to ramp up contributions as much as possible because the legislative risks are much lower.

Every change to the system saps confidence in the system. There needs to be a clear target for what the system looks like in 20 years. Otherwise I won't trust it. I'd rather control my own investments and my own structures.

These people should stay out of people's lives and control their own lives. These are our own money that we work for and not for the government or the super bosses so let us do whatever we like with our own money. Why worry about the bereaved. U are not the ones go ing to suffered, it is us that need the money now. Our own money it's like u guys help us get up 4 or 5 am to go to work. U guys should think about something else and forget about people money in super

Add new comment