As campaigning for the federal election heats up, it is important to think about philosophies, significant changes and reforms to superannuation by the major parties.
Certainly political changes and reforms to super will have an effect on your overall benefit when you decide to retire, so take this into consideration when casting your vote. Please note the discussion of the LNP’s policies and reforms will be longer as the party has been in power since the 2013 federal election.
On the Labor side there is a long-term commitment to a universal employer contribution of 12 percent to super. The architect of compulsory super, Paul Keating, summarised his idea when he stated: “Now everyone, including the bloke running behind the garbage truck, can have superannuation.”
Universal coverage for all Australians! It became law in 1992 with an initial 3 percent employer contribution which was set to move up to 12 percent in small increments. Rightly, the party has claimed ownership of the idea of universal superannuation to be settled at 12 percent employer contributions.
The brain-child of Mr Keating has become enormously popular among Australians and any party seeking to remove it would do so at their peril. It is truly a world-class retirement system.
The LNP government has mixed views on superannuation and has made significant reforms to super. I will attempt to name the more important ones (although it will not be exhaustive).
First, former Prime Minister Tony Abbott, delayed the implementation of the contribution increases at 9.5 percent to 12 percent in 2014, despite it being already legislated.
The grounds for this freeze were that employers could not afford to increase the SG (Super Guarantee) and that increased payments would result in job losses and wage stagnation.
As a result, workers lost the benefit of the legislated increases and compounding investment earnings that would be substantial over a lifetime of work. When the Assistant Minister for Superannuation, Jane Hume, was asked her views on whether super should be increased, her reply was: “I’m reasonably ambivalent on this issue, to tell you the truth” (reported by the ABC).
The delay ended on 1 July, 2021, when the government allowed the increase to 10 percent to go ahead. This happened after intense debate, especially on the part of Senators Andrew Bragg and Tim Wilson, who vociferously opposed the increase.
LNP Senator Gerard Rennick, describing our world-class superannuation system, stated that he would not put “lipstick on a pig” and that we should “kill superannuation stone cold dead”.
Significant reforms on super happened under Prime Minister Malcolm Turnbull. Arguably the most important one was the cap put on income streams (allocated pensions) at $1.6 million.
This measure ensured that individuals could not use the tax-free benefit of income streams to hoard millions of dollars. Other reforms happened under the Turnbull government as well, but the biggest change came later when the LNP allowed the release of up to $20,000 per member over two years during the COVID pandemic.
This measure flew in the face of a cornerstone principle of Keating’s plan – super is to be used for retirement purposes only, certainly not to prop up government responsibilities. The ramifications of this policy will be felt in years to come with those who withdrew funds forced to retire into a lower standard of living.
Recent changes introduced by the government (effective 1 July 2022) include raising the age for eligible contributions to 74 by raising the work test age and removing the $450 threshold for contributions for low-paid part-time workers.
This removes the glaring inequality for part-time workers, who are in the majority female, who will now be paid super. However, the government has just decided that superannuation will not be added to taxpayer-funded parental leave, which will result in hundreds of thousands of women worse off at retirement – a missed opportunity to address the gender gap for women.
So, the election will decide whether the Super Guarantee increases to 12 percent or whether it will again be delayed. Industry funds will continue to work on members’ behalf to provide high quality service, solid investment returns at low costs and insurance benefits based on our collective, not-for-profit ethos.
Bernard O’Connor NGS Super