Grattan super analysis just plain wrong

11 July 2019

Conservative think tank, the Grattan Institute has managed to unite the superannuation industry against it with its latest analysis around retirement funding and lifting the superannuation guarantee (SG) to 12 per cent.

The Association of Superannuation Funds of Australia (ASFA), the Australian Institute of Superannuation Trustees (AIST) and Industry Super Australia (ISA) were all prompted to dismiss the Grattan Institute analysis on the basis of it being yet another spurious attack on the superannuation system.

ASFA chief executive, Dr Martin Fahy, led the way by claiming the Grattan analysis “continues the pattern of selective and misleading modelling that seeks to undermine a retirement system that is globally acknowledged as one of the best in the world”.

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“Good public policy will always benefit from lucid, rigorous research and modelling,” he said. “However, the Grattan Institute’s latest output is based on unsound assumptions regarding average earnings, working patterns, the future rate of the Age Pension, how the means test for the Age Pension works, and most importantly working Australians’ aspirations for a dignified retirement.”

Fahy’s attack on the Grattan analysis was followed by that of Industry Super Australia with its acting chief executive, Matthew Linden claiming the analysis actually contradicted other recent Grattan analysis which had claimed increasing the SG to 12 per cent would ease the burden on the age pension.

Like ASFA, Linden accused the Grattan Institute of having double-counted salary sacrifice contributions and having over-estimated voluntary contributions and the amount of the age pension.

AIST head of advocacy, Ailsa Goodwin added her voice to the criticism and said it was the assets test, not the superannuation system or the superannuation guarantee time-table that were flawed.

“The changes to the age pension asset test in the Coalition’s budget of 2015 have hit middle Australia hard, with many retirees either losing their part pension altogether or suffering pension cuts,” she said. “Adjusting the taper rate is critical to the integrity of our super system and indeed the wider retirement income systems.  We need to restore appropriate savings incentives so that that super can do what it was designed to do for middle Australia, which is to supplement the age pension.”

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The introduction of compulsory superannuation was a wonderful idea. So much so that now both sides of the political divide are seeing the wealth pool as a point of plunder, and a good deal of Trustees will steadily see their powers grow enabling shaping of social policy now and into the future. We certainly live in increasingly interesting times.

Given most couples start losing serious aged pension amounts after accumulating more than $450,000 in retirement savings, it is far more sensible for young people to pay their house off first. In reality, we should scrap compulsory default super altogether, and have people do voluntary personal deductible super after age 40. That way we would eliminate over 20 years of wasteful admin fees, for very little benefit. If the member isn't prepared to make large contributions, its simply not cost efficient. Usually by 40 most people will take more responsibility with their savings, rather than end up with 10 accounts floating around in the ATO, destined to be swallowed by consolidated revenue, in many cases.

Lol you have to be kidding.

Many people at age 40 would either have nothing, or just a house with a hefty mortgage still attached. Compulsory super at least forces people to save something as Australian's are notoriously bad at saving voluntarily, until it is too late.

Compulsory super is an absolutely must, and the only reason our age pension system should be sustainable.

Having been advising since before the introduction of SGC super, I can assure you that if your house has been paid off earlier, you will be a lot more engaged with making decent retirement contributions than a 25 year old, who is still looking for a job. Compulsory super has become a trillion dollar rip off, billions of which have disappeared into Consolidated Revenue, never to be seen again.

Yeah, but most people dont pay off their house earlier.. They just buy more avocado and coffee.

Forced savings are the only reason much of the population has anything.

You would have seen in your experience how often business owners choose to not contribute to super and how often they dont save the money elsewhere either.

Yes, but most people raid their super to pay out their huge mortgages at 60 (after paying for school fees for their kids out of their home equity), or go on drug benders & withdraw all their super under hardship provisions, anyhow. Either way, there is little incentive for a fully retired couple over 70 to have over $450,000 in super savings. Unlike NZ, where there is no asset or income test.

I spoke to a woman who works for a large supermarket chain and who had come here from New Zealand. When I told her my story with REST she said when her brother knew she was coming to Australia to work he warned her about our Superannuation scheme. So she decided on Retail Fund with a Benefactor option. The kiwis know we are being taken for a ride obviously.

I think this may the first time the Grattan Institute has been referred to as a "conservative think tank"! On the contrary, they are a centre-left think tank primarily focused on issues of social equity. They are concerned that the superannuation lobby has hijacked the compulsory contributions agenda for their own self interest, which may not be the best interests of society as a whole. The unusually united response from the competing factions within the superannuation industry suggests that Grattan may have a good point!

In theory, the union fund lobbyists (ISA, AIST) should be ideologically aligned with a centre-left body like Grattan. But as we all know, the primary role of unions in general and union funds in particular, is to provide power and money to union officials. Social equity is a minor secondary consideration, easily brushed aside.

In theory

Wage theft, which seem unrestricted in all sorts of businesses, has not be tackled by indifferent government ministers nor slack union officials.

I agree with Paul Jackson anf Steve. Superannuation should be voluntary. It is NOT your money contrary to advertising by Australian Super. If it was it would be included in your Estate and you could leave it to whoever you want i your Will. Instead a Trustee can distribute it to the ideology of the Fund to somone you have known a short time and deem that person was your financial dependent. It is the biggest rort on every worker. My son's Super was with REST and a 21 y.o. girl got $200,000 plus after 2 yrs as a financial dependent when he had Muscular Dystrophy and she was on Centrelink. It has destroyed our family. I hate REST and the concept of Superannuation. They don't advertise this when you join andctell you to get a binding nomination but if your nominated beneficiary is not dependent the Trustee decides

Your comment is more about the distribution of assets within de facto relationships than about compulsory superannuation. The same result would happen with the distribution of assets of voluntary superannuation schemes.

Glad u can keep up Hedware. That is the point. IF you want to put your money into a Fund and have no control over who it goes to on your death then join an Industry Superannuation Fund. If Super was voluntary and the above is not what you want then take your money elsewhere. Maybe to a Retail Fund which pays to your nomination and if no nomination then to your Will. The point is Hedware, as it stands, someone can claim to be your financial dependent and your nominated beneficiaries can receive nothing and you are not even allowed to know what that person submitted to substantiate their claim. And you want to keep putting your money into this flawed scheme????

The point is that compulsory superannuation is to get people to save for and to fund their retirement. In part this is to reduce taxpayers having to fund pensions for those pensioners who refuse to self fund retirement and instead rely on taxpayers to help them out. Sure there are some of our citizens who need our help, but not everyone. You might be familiar of the similar model of universal healthcare.
The issue about beneficiaries of superannuation is nothing really to do with compulsory nature of superannuation and more to do with legislative constraints on pension funds and trustees. Governments of either side have not been keen on superannuation nest eggs being handed post death to children using taxpayers to fund the nest eggs through favourable taxation treatment of superannuation funds.
You have obviously forgotten that property settlement legislation overrules any nomination of beneficiaries in superannuation and pension funds. Different bit of legislation and different reasons. Would not matter if superannuation was voluntary or compulsory. Not hard to grasp.

Therefore we should return back to voluntary super. The current system penalises people who are trying to get out of debt. It's nuts, particularly as the Centrelink Age pension incentivises people to own million dollar houses, & discourages them from investing in productive investments outside of housing.

With the economy in slowdown according to Liberal and Labor the $300-$400 per month Super contribution of low income earners would make a huge difference to be in their pockets now instead of locked away for a future in 30 or so yrs time. Not much joy in that when you are struggling to keep a roof over your family's head due to mortgage stress. And of course the forever provider of members and income for these Funds, the Labor Party, want to increase the contribution rate to 12%. The Grattan Institute have never got it more right Realty.

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