The first home super saver scheme will be logistically impossible to implement by 1 July 2017 in a cost-effective manner, according to industry fund NGS Super.
NGS said superannuation funds would have to pay the costs of setting up system infrastructure costs to implement this legislative change.
NGS Super chief executive, Anthony Rodwell-Ball, said the cumulative cost of implementing numerous legislative changes that impact the superannuation industry had been significant from a technological, resource, and infrastructure perspective, SuperReview has reported.
“Given the nature of the savings (intended for a housing deposit), an educational campaign will need to be run so that members are aware of the risk inherent in investing this portion of their savings in options which may yield a negative return (depending on the market cycle).
“A differentiated and more conservative investment strategy will need to be considered by members for this portion of their savings. This further adds to the complexity of this proposal.”
Mr Rodwell-Ball noted that the tax benefit to first home buyers under this incentive would be minimal as the total cost to the Budget over four years was only $250 million.
On the incentive to reduce barriers for older people to sell their homes, he said in reality only a small cohort of people would benefit. Those seeking to balance a small Centrelink pension and a higher super balance would need to look closely at the incentive.
Mr Rodwell-Ball also said that it would be imperative to have a super specialist in the newly constituted Australian Financial Complaints Authority as many issues related to super were complex and required specialist knowledge.
“The proposal is deeply flawed and the thin end of the wedge for super savings – threatening workers’ future retirement”, said chief executive David Whiteley.
“The plan is contrary to the sole purpose test for superannuation by allowing withdrawals from super other than retirement”.
ISA also pointed out the likely cost of administration. “If implemented, the policy is likely to be expensive to administer and will impact the ability of fund trustees to invest contributions over the long term”.
“Funds will need to maintain more liquid asset allocations to deal with unpredictable withdrawals”.
“There is merit in assisting first home buyers, but this is not the way,” he said.
Mr Whiteley also questioned the initiative that would allow downsizers aged 65-plus to put $300,000 from the sale of their family home into super.
“Older Australians are unlikely to take this up in great measure as the proceeds will be counted in the pension assets test,” he said.
Mr Whiteley identified the merging of the Superannuation Complaints Tribunal with the Financial Ombudsman Service and the Credit and Investment Ombudsman into a single Financial Complaints Authority as a concern.
“Superannuation is highly complex, not just another financial product to be lumped in with credit cards and mortgages. This new body will be overseen by ASIC with significantly less funding than the current Tribunal which today struggles to properly service consumers,” he said.