Seeing Adam Creighton is against an increase in compulsory superannuation, I now feel pretty confident that some increase was in fact warranted. And let's face it, the Coalition is not saying they are against an increase happening eventually, they've just delayed it.
But what I wanted to note was Creighton's argument in the Australian this morning that compulsory superannuation is a "failure" because it is failing to reduce dependency on the pension to a large enough degree.
Yet the reason he gives for this - the pension assets and income test being too generous - is surely one of the economically easiest things to change in future. And what's more, isn't ensuring that more money is in super in the first place one of the key ways of ensuring that the tightening of the test is easier to politically and economically justify?
Surely you would have more chance of arguing for phased in reduction of government contribution to pension support if you can point to the increase in superannuation income that you're also ensuring for the future?
Update: just wanted to make it clear again that I was saying that changing the assets/income test is economically easy - in the sense that it can be relatively clear where to set the line and what effect it will have on future government outlays - but not that it was necessarily politically easy. However, it becomes politically easier if you can tell people their superannuation will be larger too.
And here's another thing - I've noticed small government types are pretty hot for the Singaporean system of health care which works to a large extent on forced contributions to health savings accounts. (Someone on boring old Amanda Vanstone's Radio National show was talking up something similar the other day.)
So why are they so against compulsory super savings in Australia? Is it just because of Union involvement in industry super?
And really, whatever arguments are against compulsory superannuation (due to fees and questionable tax treatment for those who need it least), do small government economists really think people left alone make adequate savings for retirement?
I hear a lot of whining, but don't hear much about alternatives....
Superannuation will only stop people getting some part of the pension when it gets to around 15%. The Coalition is the major obstacle in doing that.
ReplyDeletean SGC at 15% and Super ONLY being taxed at the benefit stage at the person's MTR would mean a hellva lot less people on the pension but also most people being able to afford health care in their old age.
The present system is full of holes. At present superfund managers get paid if they win and paid if they lose with fees being both upfront and embedded. Anybody paying into a managed fund is getting ripped off and most people are aware of that but don't know what to do as SMSF seems too complicated.
ReplyDeleteAs contributions are mandatory what many are doing is to borrow on their house and spend on holidays, boats etc and then use the superfund to pay off the mortgage on retirement. This could be stopped by knocking out lump sum payments.
Banks are loving this as the multiple transactions are good for earnings. One way out is to have bank shares in SMSF and live off the divs. Not only are they tax free the govt actually gives you back the tax the bank paid - no wonder Hockey is in a bind.
rog