The key players in the Liberal Government pushing to cut the superannuation guarantee (SG) increase earn more superannuation in one term of government than many retirees could expect after a lifetime of work, according to Shadow Minister for Financial Services and Superannuation, Stephen Jones.
Speaking at the SMSF Association National Conference on Tuesday, Jones said the Prime Minister Scott Morrison was currently mulling over a plan to cut superannuation.
“He said he has no appetite for big changes but there is no bigger change than this. Cutting the SG would be a breach of fundamental promise the PM gave before the last election.
“It would mean the electorate could no longer trust anything the government had promised on super. This is important because promises made by PM and every other elected representative must mean something.
“It’s doubly important for super because super is an investment for the long term. People planning for their retirement and the professionals that advise them need to know what government policy is going to be.”
He noted those that sought to keep the 9.5% SG pulled in 15.4% such as the PM, the Treasurer, and the Liberal backbenchers. The average woman, he said, earned less superannuation in her entire lifetime than the amount members of parliament pull in over four years.
Jones said one of the big reasons Scott Morrison was the Prime Minister was because of self-funded retirees but that he had “dropped them quicker than a hot potato” since the election.
“The Government may pretend that the impact on low rates on retirees is inevitable and there’s nothing they can do. Of course that’s not true. Over the medium and long-term the Reserve Bank has made it pretty clear rising wages and declining unemployment are going to be the key to raising rates again. The Government’s industrial relations policy appears to be working in exactly the opposite direction – lower wages and more job insecurity,” he said.
“The Government’s short-term policy should also be looked at. Let’s look at deeming rates – the 1% deeming rates for small investments sits alongside the Reserve Bank’s cash rate. For too long will remain well above the rate that investors could hope to get in the bank interest or short-term deposits.
“In times of hardship a swift response from government is needed. The same can also be said for the rates the Government charges retirees to access the pension loan scheme. If lower returns and the retirement cycle of investment are to be a feature of the future then we’ll also have to reassess our assumptions of what is adequate to sustain retirees over the long-term.”
He pointed to the Government’s Retirement Income Review that found the 9.5% SG was adequate but that the assumptions used were “heroic” as it assumed a 4% annual wage increase over the long-term, 7% to 8% real return on funds, and a consistent 40-year working life.
“We know these assumptions simply aren’t true. Even under these assumptions, they found many retirees would not have enough retirement savings to meet their needs in retirement,” he said.
“Their solution was for their retirees to sell down the value of the family house while they run out of money in retirement.”