Superannuation industry leaders have slammed calls by the Productivity Commission for a review of the adequacy of the sector before the amount of super paid to workers is increased from 9.5 per cent to 12 per cent of their take-home pay.
The commission, in its final review of the superannuation system, made the controversial call for an inquiry, saying the impact of compulsory superannuation on private and public savings should be examined.
“This inquiry should be completed in advance of any increase in the Superannuation Guarantee (SG) rate,” the report said.
The New Daily’s economics commentator Michael Pascoe supported that view yesterday, even saying a rise in the guarantee would dampen wage growth further and damage the economy.
However, former chair of The New Daily and IFM Investors, Garry Weaven, who is often referred to as the ‘godfather of super’, disagreed. He said holding the SG at current levels would simply result in lower levels of necessary investment.
“There is no evidence that boosting current consumption by reducing current investment and savings for long-term retirement and health care needs is a good idea,” Mr Weaven told The New Daily. “Increasing longevity alone is a convincing argument for boosting super contributions.”
Mr Weaven, who pioneered the industry super movement, both with the Australian Council of Trade Unions and in the industry funds sector, also took issue with the commission’s proposal that the government set up a shortlist of 10 top performing funds for default members to choose from. It would replace the current practice of default funds being stipulated in industrial awards.
“The idea that a government might do a better job of investing than a properly restructured marketplace of competitive professional fund managers is wrong,” Mr Weaven said.
Mr Weaven quoted research by economist Nicholas Gruen which rejected the commission’s proposal.
“Dr Gruen is absolutely correct that a system reliant on individual investment choice and retailisation of super is farcical in practice.
“That is precisely why Fair Work Australia should be empowered to resume its expert panel to tidy up the default super fund system.”
Fair Work Australia was to choose an expert panel to select new default funds for the super system but legal and political moves have seen the process stall.
“The current federal government has sabotaged that process at every turn,” Mr Weaven said.
The call for another inquiry before the SG was also rejected by other areas of the super sector. Martin Fahy, CEO of umbrella group the Association of Superannuation Funds of Australia, said: “We’re happy that the report acknowledges the system is delivering good outcomes for the majority of Australians, and that the majority of funds are delivering”.
Dr Fahy said the commission’s call for a review of the system prior to moving the SG higher “is not warranted by the evidence”.
“It seems inappropriate to call for yet another review on the sector that’s been reviewed to death and where there’s widespread acknowledgement that the overall architecture is solid and we shouldn’t delay going to 12 per cent,” he said.
Zak May, policy chief with Industry Super Australia, said a review of the super system was not necessary before the SG was increased to 12 per cent.
“The social policy purpose of the retirement incomes system is to ensure that the superannuation and age pension systems combine to deliver a reasonable lifestyle outcome in retirement based on community standards.
“Research suggests that the current superannuation guarantee level of 9.5 per cent is not enough to achieve that for most people so it needs to go up. Another review of the system before increasing the SG would represent just one more delay for something we already know needs to happen,” Mr May said.
Sally Loane, CEO of the Financial Services Council that represents for-profit funds said: “We support and have always supported the superannuation guarantee moving to 12 per cent.”
“That move would help Australians reach better retirement outcomes. If there was to be another inquiry we’d obviously cooperate and work with it, but we think there are some good arguments for why we should get to 12 per cent,” Ms Loane said.
*The New Daily is owned by Industry Super Holdings