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ASFA sets the record straight on Taylor’s 401(k) comments
Despite last week’s media frenzy suggesting the Coalition might be eyeing a voluntary superannuation system for Australia, funds are unfazed by any perceived hidden agendas from the opposition.
Reports emerged that shadow treasurer Angus Taylor is contemplating dismantling Australia’s compulsory super system to align it with global retirement schemes, particularly the US 401(k) model – a voluntary framework that has stirred controversy.
“The Coalition has started by aligning superannuation with other global retirement schemes – like 401k – that allow withdrawals for the purpose of purchasing a first home,” Taylor said at an event in Sydney last week.
The Australian Council of Trade Unions (ACTU) decried Taylor’s remarks on Friday as the “strongest signal yet” of the Coalition’s intent to “dismantle and Americanise” the superannuation system, saying it threatens workers’ retirement security.
However, media reports and the ACTU overlooked the context – Taylor was discussing home ownership and reiterating the Coalition’s previously unveiled policy to ease access to housing by replicating the 401(k) model, which permits withdrawals for first home purchases.
Speaking to Super Review, Association of Superannuation Funds Australia (ASFA) CEO Mary Delahunty said Taylor’s sentence was clearly taken out of context.
“The full sentence makes it clear that that reference to the substandard American system is drawing a comparison to the Coalition’s policy on early access,” Delahunty said. “Broadly, it’s not Coalition policy.”
Delahunty said that conversations ASFA has had with the Coalition reveal its awareness of the superannuation system’s role in Australia’s economic stability.
“They know that we provide a pool of capital that support infrastructure. They know we provide a pool of capital that supports business growth and that we reduce the pressure on the public pension,” she said.
“The shadow treasurer knows that to materially undermine the system that was just ranked sixth in the world, would be pretty detrimental to his budget if he was to be Treasurer and the nation’s financial resilience.
“Presumably that is why it is not their policy. I don’t think they are really suggesting it in a broad sense.”
The Coalition’s proposal to expand early access to superannuation for first home buyers aims to tackle the worsening housing crisis by allowing them to use their savings as deposits and combat declining home ownership rates amid soaring prices.
This proposal has drawn criticism from economists and funds that said allowing people to tap into their superannuation for housing could exacerbate the housing crisis rather than alleviate it.
Delahunty agrees with this assessment. Speaking to Super Review, she said the US can actually serve as an example of how this policy has failed.
“Interestingly to note, and it has been shown by the ongoing housing crisis in America, [early access] doesn’t actually build a single new house … It just increases demand,” she said. “America is facing an incredibly detrimental housing crisis.”
Admitting that “housing is an incredibly important issue” and acknowledging existing concerns, she said younger generations should not be forced to choose between saving for retirement and buying a home.
“I was never asked that, I was able to aim for both, and we want more for the next generation than we had ourselves … It’s not fair and it doesn’t work,” she said, adding that the simple fact of the matter is that “there are no houses”.
While Taylor’s comment on 401(k)s may have been taken out of context, Coalition members have previously argued for a more flexible superannuation system that enables Australians to make voluntary contributions based on their individual financial circumstances.
Senator Andrew Bragg has been the most vocal proponent of this idea, advocating a voluntary superannuation system in public and in his book, titled Bad Egg: How to Fix Super.
Commenting on this, Delahunty said candidly: “That’s a view that can be held by someone who doesn’t have as important a portfolio as Angus Taylor does.
“Angus Taylor is looking at this as the alternative treasurer, he knows the importance of superannuation on the relief of the public pension.”
The CEO said that “not a week goes by” without an international delegation reaching out to ASFA for insights into the Australian system.
“I’m about to go meet with UK ministers because they’re doing an inquiry into how to build a system like Australia … There is no one in the world that doesn’t envy our system,” she said.
“It would be short-sighted of anyone to undermine that.”
The 401(k) model in the US is a voluntary, employer-sponsored retirement savings plan that allows employees to choose whether to participate, set their contribution rates, and benefit from tax advantages and potential employer-matching contributions.
AUTHOR
Maja Garaca Djurdjevic
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