Editorial - Superannuation e-news March 2010

Following last month's closing date for submissions to the final phase of the Cooper review we might now be tempted to turn the page, settle back to our day-to-day duties and await the final outcome of recommendations expected by the end of June. But let's spare a thought for the committee. They must now pore over what seems like a mountain of ideas from the public submissions. Dr Ken Henry raised the issue of equity in some of his final speeches before presenting his report in December. We believe the case for equity needs to be recognised within the overall context of what the government is proposing to do for retirement incomes policy. Taking too narrow a view of the immediate concessions provided to superannuation without also recognising the future benefits to the budget bottom line from lower levels of Age pension support -that would inevitably follow for self funded retirees who accumulate assets- is otherwise not a valid basis for analysis.

A major role of the Cooper review as we see it will be for the committee to use its knowledge and experience to come up with various practical additions to form the basis for enhancing our superannuation system. We believe that by June it is unlikely there'll be any suggestion for a wholesale re-vamping of the superannuation system. The Better Super regime has far too many attractive attributes so it would be difficult to jettison them and readily replace them with something equally attractive. There are however several issues that require sorting. A good case in point might be the limitations posed by the 10% rule that constrain eligibility for making deductible contributions unless an individual is deemed to be substantially self-employed. These limitations should be abandoned as we move into the future. The June recommendations will address such areas to improve the way the current system should work.

The current system fails to adequately address a major difficulty posed by the lack of knowledge across the board, faced by significant numbers of public or retail superannuation members. The fact that they often have to make choices in respect of issues about which they have limited knowledge is a critical weakness. In addition they could be influenced by those who may be enthusiastic to sell particular services. Sadly the problem is compounded by the fact that there is little to suggest that we might see any turn-around in the attitude or knowledge of members who are not really inclined to engage with superannuation. This prompted an interest in a low cost vanilla -no advice- product by Cooper, which was promptly rejected by the large funds whose fee income would be on the line.

A further difficulty with superannuation is the history of continuous changes to the rules during the previous two decades. This has largely inured members to the belief that it is not worth learning the rules of super, firstly because of their complexity but also because in the past certain game changing rules may have only been relevant at a time closer to retirement. This further cemented negative views and general disinterest by large segments of the public. Unfortunately the longer the member is disconnected the less chance there is of becoming re-connected, adding to a wider gap in members' understanding of superannuation.

Bearing in mind the logic that Minister Bowen drew upon at the announcement of the Cooper review, both in relation to its recommendations and subsequent implementation; the depth of the inquiry would raise salient issues which if addressed in a bipartisan way would lead to a lesser need for changes and therefore a period of legislative stability. This is something we could all look forward to, so let's hope the Minister's logic holds up to the test.