Could the super guarantee increase be bad for your business?

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Former Treasurer Peter Costello has accused the Labor government of being “blissfully ignorant” of the possibility that a 3% rise in the superannuation guarantee could lose Australians millions.  

Calling for a full review of the superannuation industry, Costello has claimed that forcing Australians to increase the amount that they put into what could be loss-making super funds could severely dent their retirement nest eggs.

According to a Fairfax report, Costello is concerned about the small number of Australians that are aware of how poorly the superannuation sector has been performing in recent times, and that they may unwittingly be forced to put more money into bad investments.

“The current government and the current Treasurer are blissfully ignorant that they are requiring people to give up more and more of their income and lose it,” he told Fairfax.

''What they could well be doing is legislating people into bad investments,'' he added. ''I don't think the question is how much you're putting into it, I think the question is how much is going to come out of it?''

According to the report, SuperRatings figures reveal that the average balanced super fund has returned 0.3% over the past year, with rolling returns over the last five years coming in at a loss of 0.2%.

Do you agree with the superannuation guarantee increase? Is a review of the super sector needed? Have your say by commenting below.

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  • Alistair on 5/09/2012 12:06:25 PM

    Isn't this a joke. To have a nimble minister like Shorten talk about retirement planning - the Labor Party way as though magically by the sprinkle of Socialist policies of his party, the work or punter will be better of. Please mention how his party has damaged the reputation of Superannuation as a savings vehicle by removing the amount we can put in as we get older. By fiddling the tax system so as to make salary sacrifice contributions into super unviable for much of the Labor party voter base. Then also ensuring that in volatile times, the Age Pension system remains a debacle as we try to support an unfunded liability that will envelope generations to come in taxes and more taxes thanks to this Monty Python like government.
    An incompetant lot that have ensured that businesses who are burdened with more costs seek to shed staff thereby ensuring more hardship is felt by families.
    This government has failed the people they are supposed to represent. Put simply, they do not care about the financial services industry or for that matter ANY industry and ultimately they do not care about the people. Arrogant and defiant, they will not listen to ANY industry body. Socialist nonsense is all they are about. Debt and Deficit with policies that are nothing more than Scorched Eart in design. Labors legacy this time is your family and or business finding hardship. The sooner they (Gillard and Co )are gone from political office, the better.

  • Innocent Observer on 3/09/2012 5:21:26 PM

    agree Herbert, and I wasn't suggesting a privately managed infrastructure scheme. thinking more of a scheme underwritten by the govt, with a crediting scheme linked to member contributions and timeframe.... say 5% + CPI (and no fees). Increase contributions tax (maybe 20%, 30%) and apply a reversionary benefit (either a flat rate, say 50%, or calculated on age...say 120 less age = % that is paid to dependents at death), open to payment tax-free to the nominated beneficiaries, regardless of whether they are tax dependents or not. And limits on withdrawals....effectively it would be like an annuity that starts at retirement. Yes this would increase upfront tax receipts and vastly increase tax on wealth transfer, but it would get us a heck of lot closer to a sustainable superannuation system. It would also provide retail investors with the peace of mind of knowing that tucking away $50 or $100 per week throughout their working life will provide them with a govt. underwritten income stream of $x at retirement. From a purely financial perspective, our current system - and the increase to SG - provides a net negative impact on federal govt. accounts (extrapolated 30+ years)

  • Herbert H Hubert on 3/09/2012 4:43:05 PM

    Peter is right but like many political people they miss the target and sorry to say so does the Innocent Observer, for different reasons.
    Peter, Super is an investment what investment other than a bank account has been any better in the last 5 years, your supposing that an investor will make a better decsion outside Super....I think not. Infrastucture is not the answer Innocent Observer, just ask MTAA and a defined benefit scheme would be diabolical - who pays for the ugly times, magic doesnt happen in a defined benefit scheme.
    I think Govt should stop attempting to make it easier and constantly shift responsibilities away from the individual, yes they should increase the SG but the member should shoulder that responsibility not the employer. Super has'nt performed poorly, shares, property fixed interest etc.. have - Super gives you the same outcome with less tax, generally.
    It's about time Aussie's stop expecting the Govt to act like an insurance company - those concequences are dire, just look at Europe where all the best "intentions" deliver a disastorous outcome.
    Please shift the interest to generate your own wealth to the would solve a lot.

  • Dinosaur on 3/09/2012 12:49:03 PM

    Quite correct, Ben. It makes me frustrated to the n'th degree when a financially highly educated and respected figure with considerable influence appears to miss the point entirely. Surely he must know very well that it is being in a non-performing investment choice,or portfolio that is inappropriate for the state of the economy, that produces the poor result. As you say, Super is purely a tax-advantaged vehicle for long-term saving/investment, and I believe the problem is lack of basic investment education which leaves the majority of superannuation investors at an entirely unnecessary disadvantage. As you know,in many industry or corporate Funds, the default is their "balanced" fund, which may well have around 70% in shares and property. In these uncertain times, particularly for clients approaching retirement, many people (if they understood the very unbalanced allocation in their "balanced" fund) would surely take steps to ensure their super portfolio had a shorter term focus, perhaps more conservative. Yet I find a significant number of folk who are not aware of the most basic facts about the investments within their Super, or that in almost every Fund they can switch between investment offerings at any time.

    Surely this is the sort of message regarding the basic education of investors that these influential commentators should be promoting rather than a broad-based negative comment on the future of superannuation returns?

  • Innocent Observer on 3/09/2012 12:11:32 PM

    Legislating SG, and SG increases, is a double edged sword. On one hand, it's helping Australians save for retirement, which in turn is intended to increase the proportion of self-funded retirees, and thereby lower the burden on our welfare system. The massive downside is that, as Peter suggests, most people are terrible investors (a function of poor investment knowledge). The bigger downside is that along the way the govt. is losing massive amounts of tax receipts. The question must be asked: is legislating higher SG actually saving the govt. in the long run?? ...our calculations suggest "no". Why not have a federal defined-benefit scheme where investors could lock their $$ away with peace of mind, and the $$ could be used to replace foreign debt & invest in national infrastructure projects? Unfortunately it seems many advisers/dealer groups are very "one-dimensional" in their opinion of SG...which is kind of strange, given it's our job to read between the lines & consider the consequence of our strategies....

  • Ben on 3/09/2012 12:05:55 PM

    That's the spirit! Keep scaring people that super is a bad "investment" rather than educating them on it's benefits as a "tax structure" with whatever investment strategy they are comfortable with! Good job Peter!

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