Are constant changes to super taking a toll?

Superannuation is already front and centre in the Federal Election debate. A Super Review roundtable examines the key issues facing the industry and its key stakeholders.

Mike Taylor, managing editor, Super Review: Okay, well we have three fund executives and the chairman at the table here and clearly you must be getting feedback.

I think some of you in your earlier answer reflected that you’re obviously getting some feedback from your members about how they’re feeling about the Government talking about super, talking about changing the tax rules, particularly the tax settings.

I’d like to go to you Paul, you know what’s the level of sentiment about this from members, particularly possibly some of your older members who’ve probably got some pretty large balances?

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Paul Cahill, chief executive, Club Plus: I suppose there’s three camps. I’m using our fund as an example. We have the under-30s who are generally not overly interested. You could mention super to them and you just see the eyes glaze over. 

With the 30-to-45-year-olds it sort of heats up a bit. They’re getting a little more interested because they’ve seen their account balances turn into something that you know potentially one day will be decent.

Then you get the 45, 46’s and over – that’s the only thing they want to talk about.

You know, if you go to a barbecue with 46-year-olds the first thing that comes on is superannuation or investments or property, they’re the first three things they want to get into about.

At our fund we see enormous interest in any political-type discussions in the 46-plus brackets because they’re looking directly, they can see retirement, it’s not that far away and many of them are plotting what they’re doing, when they’re doing it and how they’re going to do it.

A lot of the things that come out through either the media or the Government or out of Canberra has an almost immediate impact on their life, and if some part changes in one corner it affects their lifestyle straight away.

So you see their ability to rationalise that very quickly and then they want to get advice on it, they want to talk to you about it, they want to understand how that impacts right at the coalface, what’s going to happen to their account balance, what does that mean for me at age 60, straight away, they’re right into it.

Our superannuation industry is maturing. Now if you look at it like a lifestyle it’s in that middle-age bracket. It’s getting more mature.

It’s starting to have a few grey hairs and a few wrinkles and it’s not this unique new thing that’s come up.

It’s been around universally for 20-plus years and we’re starting to see some of the middle-age concerns come through it.

The inequities – yes, we’re all about that – but at the same time we need to make sure that this thing that is so good for our country, our workers and our community as a whole is maintained.

No different to a middle-aged body, you’ve got to do things to it differently to keep it at as good a point as possible; and it needs the attention by industry and by Government and by the whole of society to make sure it remains the thing we all want it to be, which is providing people the best possible retirement we can give them.

Mike Taylor, Super Review: Alex, your members?

Alex Hutchison, chief executive, EIS Super: I think the age group, as Paul pointed out, for our members, it’s mainly early-40s, that’s when they really start having a look at superannuation because of the points Russell made.

That’s when people can afford to and that’s when they want to catch up.

So until we had the commencement of this latest debate on tax, frankly the biggest issue was the contribution cap.

That’s one thing we need to get out because really, if you can only catch up from your early to mid-40s, it’s never going to be enough at 25k a year. You know they’ve got to go back.

Also, recent government policy has exported complexity out of the system.

So you for many reasons we don’t want to import complexity when we’ve done a good job – I think recently governments have done a good job of exporting that complexity.

So that’s a couple of background things, but at the end of the day I can only mirror what Paul says: you know, it’s that key age group, you want to catch up and you want things nice and simple.

And frankly, whether you’ve got millions or you’re a high earner should be irrelevant, you should have the same rules for everyone.

It’s not about inequity, it’s about being egalitarian. Don’t change the rules, give people confidence and move forward on that basis.

That’s our view.

That way you’ll get more people putting money in and people need the ability to catch up. That’s frankly the bigger issue.

The bigger issue is the contribution caps – “how do I catch up?”.

Mike Taylor, Super Review: Richard Shearman your membership, is I would judge, a pretty informed cohort of people and on my estimate of what goes on with NGS Super, there are some pretty substantial account balances there.

What’s the feeling?

Richard Sherman, chairman, NGS Super: Well there aren’t that many people with substantial account balances, that’s the reality.

I agree with Russell and I agree with the comments that have been made about the caps. Our members would like to see those lifted, there’s no doubt about that.

Coming back to the tax regime for super, it’s not correct to say that people don’t want any change. People are quite happy to have changes if the changes benefit them.

We’ve had lots of changes to superannuation tax regime over the years and no one’s complained when that’s been a liberalisation of the tax benefits.

And sometimes there will have to be, for the reasons that have been outlined in terms of fiscal constraints and other demands on the Budget – some of them might just have to be tightened up from time to time.

It’s a question of which ones get tightened up and if superannuation moves away from being what it is supposed to be – that is a vehicle for assisting people to actually have a better standard of living in retirement – it has within it the capacity for it to be simply a tax dodge for certain sections of the population, and that should be fixed.

So it’s a question of balance. I said at the beginning that we would like to see as few changes as possible. I think certainty is incredibly important.

There’s no doubt – and the figures actually show it when you look at inflows into the fund – that volatility in returns over the last few years is what actually stopped people contributing to super, not fear about changes to the taxation regime.

That’s what stopped them, and as we’re getting now more stability in those returns people will have confidence to contribute again. So that’s been the key factor in why there’s been a loss of confidence, in my view, about superannuation.

People have been concerned in that age group where they’ve got balances that mean something to them, the 40-and-above age group, to say “oh, what’s happening to my super, it’s going backwards”.

That’s been a far greater concern than something that might come out of Canberra that will not in the main affect them.