Soft compulsion tactics will exacerbate Australians’ general disengagement with their superannuation and undermine government and industry efforts to improve financial literacy, according to the chief executive of Australia’s largest legal industry superannuation fund.
Legalsuper chief executive Andrew Proebstl has slammed proposals by certain sections of the superannuation industry, including the Association of Superannuation Funds of Australia (ASFA), to boost retirement savings via soft compulsion methods. These methods could, for example, entitle employers to automatically sacrifice a small percentage of an employee’s wages into super if he or she receives a wage increase or changes jobs.
Proebstl said that middle Australia’s disengagement with its superannuation is at the heart of the nation’s retirement savings problems and government and industry need to focus on equipping people with the financial skills needed to plan for retirement.
“We need to empower Australians to take greater ownership of, and make decisions about, their savings and rely less on others making decisions for them.
“If the Government is considering widespread use of soft compulsion it needs to be mindful that it will be entrenching responsibility for savings with employers and making it harder to achieve its own stated goal of raising financial literacy levels.”
According to Proebstl, soft compulsion is unlikely to be advantageous for all employees. He said some, for example, would benefit far more from using the money to pay off their mortgages.
“Soft compulsion may put some Australians under further financial pressure without their realising it,” he said.
ASFA chief executive Pauline Vamos has voiced support for soft compulsion options, believing it could be an effective way of reaching out to people earlier in their working lives and encouraging them to save more. An ASFA survey carried out late last year found there was overwhelming support for soft compulsion super savings among working Australians, with 86 per cent of the 750 respondents stating they believed it was a good idea.
