There are things to like and dislike about the Government Retirement Income Review for both sides of politics. And, also, to like and dislike about providing ‘observations’ rather than ‘recommendations’. But neither has quelled debate.
In his opening comments at a webinar last Friday (November 27), Martin Fahey, the chief executive of ASFA, said it would be good to get access to the underlying data for the Review panel’s ‘fact-based’ observations. Fay was in discussion with Robbie Campo, the Cbus group executive for brand, advocacy and product, and Jeremy Cooper, the chairman of retirement income at Challenger.
Campo said that it was disappointing that the terms of reference did not invite recommendations and set some priorities for changes. “We’ve seen a number of parties hijack the findings and put their own reviews on them,” she said. “But the report does point to things that could be working better.”
Campo, who is also the chair of the Women in Super policy committee, said she would have liked to see more focus on gender equality, which was likely to continue for decades. “The report pays attention to a number of groups for whom the system is not working as well, and women are one of those groups. The report also identifies some elements that could be improved,” she said.
It was also disappointing that the panel decided not to include detailed modelling of the impact of the Early Release Scheme, despite the awkward timing. The scheme cost super accounts more than was expected, at about $35 billion coming out of the system and this was likely to have more of an impact on women, Campo said.
One of the observations in the Review, which was highlighted in the Government’s summary in response, was that there could be a host of reforms to help those disadvantaged by the super system.
The Review said these reforms included:
- removing the $450-a-month threshold when the SG is paid
- paying the SG on employer-paid parental leave and the Government’s ‘Parental Leave Pay’
- giving greater visibility of superannuation balances in divorce settlements
- extending the SG earnings base to include overtime, and
- ensuring people receive the SG they are entitled to, such as by paying the SG at the same time as wages, and better enforcing sham contracting laws.
These are all proposals that each of the several women’s lobby groups, especially Women in Super, have been arguing for years, under both Coalition and Labor governments. And they all have the support of the two main super industry lobby groups, ASFA and AIST.
But the Review committee members tempered this observation with the comment: “The impact of some of these changes on people’s retirement incomes may be small.”
Fahey said that getting rid of $450 floor under monthly wages before the SG became applicable and the other restrictions on the SG. “They are no-brainers and we really should just get on with them.” Fahey said later, though, that it was relatively easy for the Government to make the political decision to not go to 12 per cent with the SG.
Cooper said he liked the piece of work produced by the Review because there was a logic and discipline to it. You don’t get far into it, on page 25, and you see a fantastic quote,” he said. “It’s ‘There are no facts when making long-term predictions’… I love how the objectives are now back on the table, as much as they can be without recommendations.”
He said the report had cohesion which was important, identifying drivers, processes and incentives used to meet objectives. An example from the Review was that tax concessions did not seem to be achieving something useful.
He said there were “behavioural issues littered throughout the report. There were multiple instances shown when the system had not gone far enough in its pre-packaging and making things simpler. Many problems were anchored in these behavioural issues he said.
But the Review dismisses any likelihood of short-term success in improving financial literacy, perhaps, therefore, shining a light on a greater need for advice. “With advice, there’s a need for funds to provide guidance, which is important under a compulsory system,” Cooper said.
A major dichotomy has emerged over the Review’s observation that retirees were not using their savings “properly” by not consuming as much as they could. Cooper said that he was a supporter of the Government’s pensioner home-lending scheme, but there were huge numbers of issues around reverse mortgages, involving things such as lack of an inheritance tax, unlike countries such as the UK, which change people’s behaviour.
He referred to an article in The Australian newspaper written by finance columnist James Kirby under the headline “Preserving capital always paramount’. This was a counter-argument to what Treasury and others were saying, where retirees should spend more from their capital in retirement.
“We have seven million retires who completely disagree,” Cooper said. “They are deliberately preserving capital. There’s your battleground.”
– Greg Bright