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Super Fund Industry Rails Against New Government Proposals- AGAIN
Once again, the superannuation sector is resisting government proposals that would change the industry, and is strongly dissenting against any move towards a compulsory government annuity scheme, in which retired investors can hand either all or part of their superannuation and receive an annual income.
The industry says any such measure would result in people being discouraged to save more for their retirement and would effectively act as a subsidy by the less well off for the wealthy, who tend to have longer life spans.
The Henry review of taxation, which recently released its interim report, which suggests that the government should run a mandatory scheme, which would allow Australians to pool part of their super, and would enable them to receive annual payments after retirement, which would be determined by the government.
The Henry review argues that such a scheme would mitigate against longevity risk, the risk that retired investors run out of fund in their retirement account before they die. The proposal would in effect prevent people from spending their savings to quickly.
John Brogden chief executive of the super fund industry association IFSA, quickly slammed the proposal, saying the scheme would suffer from too much complexity, it would be expensive to run, and could have a number of negative unintended consequences.
Mr. Brogden says that a uniformly priced annuity scheme operated exclusively by the government would reward people who lived longer and punish those with shorter lifespans.
“According to the Australian Bureau of Statistics, manual labourers do not live as long as office workers. So when the blue-collar and white-collar workers all put their lump sums in together, the blue-collar worker lump sum will spend its time subsidising the white-collar retiree once that blue-collar person dies.” Mr. Brogden said.
He went on to add that a mandatory government annuity program would seriously affect the level of confidence Australians had in their super, and discourage them from saving any more than the mandatory 9 per cent of their income.
“Such an annuity scheme will strongly discourage voluntary contributions into superannuation due to the harsh restrictions imposed on how those savings can be accessed in retirement,” Mr Brogden said. And he believes the temptation for the government to spend the money and then tax to get it back is high.
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