The Government’s Stronger Super package released this week unnecessarily dumbs down superannuation, encourages Australians to disengage with their super and wilfully ignores the fact that there are already many viable, low-cost superannuation plans that cater to the needs of everyday working Australians, according to the Corporate Super Specialist Alliance (CSSA).
“The Government’s socialist approach to superannuation may lead people to think they don’t need to take any personal responsibility for funding their retirement lifestyle,” said CSSA President, Douglas Latto. “In reality, everyone’s wants and needs are different and most people require some education and assistance in order to understand what those wants and needs are likely to be in retirement and how to fund them.”
Mr Latto argued that a ‘one size fits all’ approach, which offers no opportunity to pursue a higher performing investment outcome and which doesn’t provide education on issues such as the benefits of additional contributions, may see many people not having enough money in retirement.
“It is a short-sighted approach which will almost certainly result in an unnecessary increase in Centrelink payments to retirees, which will ultimately cost our economy more,” he said.
Mr Latto said the Government’s own research reveals that corporate super plans already offer highly efficient and the most cost-effective solutions for millions of employees. “In its approach to MySuper, the Government has wilfully ignored these facts,” he said. “It is ridiculous to force members of these funds with low account balances to move to more expensive MySuper accounts. Forcing them to leave could have dire consequences, particularly if their advisers have installed specific default investment and insurance options.”
The CSSA is also concerned that members who are forced by the Government to leave their low-fee corporate super plans will lose the insurance policies they already hold. The insurance cover could include important benefits such as salary continuance which the member may not be able to replace.
“These are low cost policies with superior benefits, thanks to group insurance rates and other benefits and discounts negotiated by corporate super specialists,” Mr Latto said. “The other problem is that with members leaving corporate super plans en masse, the cost of insurance policies for members remaining in the fund will have to increase. That’s obviously a poor outcome for those who stay, as well as for those who go.”
Mr Latto was also sceptical about components of the MySuper proposal in relation to insurance.
“The proposal contains a massive motherhood statement to the effect that a member’s superannuation will not be reduced by premiums for insurance cover that the trustee has determined is not suitable for their members,” he said. “How can a trustee have any idea what is suitable for a member when trustees are not required to know anything about the member’s financial situation?”
Mr Latto said the CSSA is also concerned that there is no effective mechanism for corporate superannuation specialist advisers to be adequately paid for providing proactive education and other important services to members of MySuper funds.
“If these services are removed, many millions of working Australians will lose access to advisers in their workplace,” he said. “Research has confirmed that these services are very highly valued by the majority of employees.”
The CSSA believes that the current corporate superannuation environment works very well.
“Market forces have seen costs reduce and benefits improve dramatically over the past two decades,” Mr Latto said. “Legislating compulsory changes to fix something that is not broken seems like a total waste, particularly when MySuper could disadvantage rather than benefit millions of working Australians.”