The New Daily

Super reforms ‘unfair and dumb’

ANALYSIS: Superannuation changes could hurt women and young workers.

The government is in discussions about super reforms.

The government is in discussions about super reforms. Photo: AAP

The suggestion that low-income earners should be able to “opt out” of the compulsory superannuation system is unfair, discriminatory and just plain dumb.

It would be particularly bad for women and young workers, who have enough trouble building a superannuation nest egg.

It’s unclear which employer group or groups proposed it, in the submissions being made to the Turnbull government ahead of the next federal budget in May.

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But Treasurer Scott Morrison hinted at the idea in a speech he made to the Association of Superannuation Funds Of Australia in November 2015, so maybe the idea first came from him.

In the speech, Mr Morrison said: “Once an adequate retirement income has been secured, there could also be more flexibility for individuals to choose between consumption opportunities during their working life and compulsory saving for retirement.”

Financial Services Council CEO Sally Loane said that super's objective was to increase standards of living for retirees.

Financial Services Council CEO Sally Loane said that super’s objective was to increase standards of living for retirees. Photo: AAP

It’s true that Mr Morrison raised the idea of spending on so-called “consumption opportunities” once an “adequate retirement income has been secured”.

But the idea of an “adequate retirement income” is rubbery and changing the principle of compulsory superannuation for all full-time and part-time employees (plus some casuals) would set a worrying precedent.

Only a minority of Australians will be self-funded retirees in coming decades, and the majority will access the age pension because their retirement savings are inadequate.

The proposal put to the government is said to involve allowing those earning less than $37,000 a year to opt out of receiving the 9.5 per cent compulsory super contributions from their employer.

The idea is that receiving this amount as pay would deliver a pay rise of up to $63 per week.

Now, the government has previously muttered about being able to draw on your super to pay off a HECS debt, or to buy a home. Nothing has happened on either front, so maybe we should not get too alarmed at the kite-flying over low-paid workers.

On the other hand, the government has already frozen the super guarantee at 9.5 per cent instead of the gradual increase to 12 per cent.

From next year, it also will cut the Low Income Super Contribution (LISC) – a $500 rebate each year for people earning under $37,000 which helps boost the super of about 3.6 million low-paid Australians.

What is worrying is that the federal Treasurer does not appear to acknowledge the value of compounding returns – the returns over and above your contributions also earn a return. A bit like interest on your interest.

‘Super is about increasing standards of living for retirees’

The chairman of Industry Superannuation Australia, Peter Collins, argues that super builds a substantial nest egg for the vast majority of Australians through compounding returns over decades of saving.

“The younger you start putting money into super, the more you retire with. This proposal would cost younger workers very dearly in the long run,” Mr Collins said.

The CEO of the Financial Services Council, Sally Loane, said that super’s objective was to increase standards of living for retirees and reduce the cost to taxpayers of Australia’s ageing population.

“Proposals that lower-income Australians should be able to ‘opt out’ of super, or withdraw their super to buy a home, would undermine this objective,” she said.

According to modelling by Industry Super Australia, saving an extra $1 in super now is worth $4.04 to a 20-year-old and $1.69 to a 50-year-old.

At the same time, more superannuation savings means less reliance on the age pension in the future.

With the government in a tangle over tax and negative gearing, it should ease its problems slightly by scotching any opt out clause for the low-paid on superannuation.

Mark Skulley is a freelance journalist based in Melbourne. He was a reporter for The Australian Financial Review for almost 19 years, which included a decade covering national industrial relations and the world of work. View all of his columns here.

DISCLOSURE: The New Daily is owned by a group of industry super funds.


  • Gympie

    Since employers typically tally up and send in the 9.5% at the end of the month, and the funds don’t make enquiries with the slackers until about 4 months later, it’s hard to see what’s in it for employers, who will also have 9.5% added on to Annual Leave, Sick Leave, and Long Service for anyone who opts out and takes the 9.5% as a pay rise.
    Looks like Morrison is backing away from what would be a very popular policy among us irresponsible, lazy plebs.

  • mulga mumblebrain

    Boganastan goes right down the toilet when our world’s greatest property bubble bursts, and I expect the Great Austrayan ‘aspirational’ mediocrity to take it very, very, badly indeed.

    • Gympie

      This proposal also makes sense if the soon to be Shorten Government intends to solve it’s “revenue problem” by redirecting the 9.5% super gaurantee directly into Treasury coffers.
      Taking a $63 per week pay rise off 4 million voters would be politically “courageous”.

      • Lies like that one show you up for what you are a rusted on Lib.

        • Gympie

          The Gillard Tax Cuts caused the so called revenue problem for the incoming Coalition Government, though you won’t hear that from our Labor lovin’ media.
          It’s only fair that Turnbull returns the favor.

          • mulga mumblebrain

            There was this thing called the GFC, through which Australia was one of only two OECD (out of twenty) countries that emerged without a severe recession.

      • Niall d’Christopher

        See, you don’t need a long neck to be a goose.

  • Rye an

    The Authoritarians with a pretty face know who to look after.

  • The $63 extra pay quoted is entirely illusory, if someone is earning $400 per week then 9.5% is only $38 dollars showing what a lie is being perpetrated by the LNP in their efforts to find funding for the perks enjoyed by the rich.

  • Veganow

    And the golden rule?
    The para$ites with the gold make the rules.
    Funny that.

  • Gympie

    The Compulsory Superannuation Industry’s big problem is that it’s got a $2 Billion river of gold pouring in every week, and there’s a certain entity in southern New South Wales that’s got cash flow problems, and no scruples when it comes to oppressing morbidly obese fat cats who’ve been on the gravy train at the general public’s expense for waaay too long.

  • James

    The LNP created the super problems and now wants future generation to pay for these problems

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