…as industry funds accept choice of super as inevitable

Industry super funds have accepted member choice is probably inevitable, but will argue for a socially responsible model as the compromise, saysIndustry Fund Servicesexecutive chair Garry Weaven.

Speaking at an Association of Superannuation Funds of Australia (ASFA) lunch in Melbourne last week, Weaven argued there are only two possible outcomes for Australian superannuation in the future.

“There could be the ‘let it rip’ model or a single scheme without choice,” he said.

“However, it will be possible to conceive a system which is more socially responsible in contrast to a marketing driven model.”

Weaven’s marketing model would see no increase in contributions or any tax cuts to encourage saving.

“This works on the principle that super is adequate and people should choose their own form of self-provision for retirement,” he said.

“However, the Budget has opened up the possibility of the statutory contribution being increase.

“Both parties now realise 9 per cent is not adequate.”

The model would allow members early access to their funds so they can be used for health, housing or education. Weaven admits this would be popular with politicians as they would be seen as delivering benefits to the electors.

The downside of this model is super would be sold on brand and by commissions paid to advisers, which he sees as not being in the interests of fund members.

“It is a very easy way of stuffing people in compartments,” he said. “There is nothing evil in that as it is the forces of the marketplace.”

The alternative version Weaven proposed was a socially responsible model. This would feature a government contribution in lieu of tax. He argued a 1 per cent government contribution could add $1.8 billion to superannuation.

“It is the opposite to tax cuts in personal superannuation,” he said.

“It would also get politicians noticed which is what they want.”

Weaven sees this as a mid-term policy and might also be coupled with a small cut on the tax on superannuation contributions.

This model would not allow access to a member’s funds for education or healthcare. It would also abolish commission selling.

Weaven says moves in the next few months by the Federal Government on superannuation would give an indication of which model it is going to pursue.

“On the other hand, neither model may eventuate and the Government could conceivably take modest practical steps on the regulatory front while implementing its election promises,” he says.

“At least for the first time this represent an acknowledgement by the Coalition that adequacy has not yet been attained.”