Super - is it really worth all the bother?
There are a number of anomalies that you come across when you examine the op-eration of the Australian superannuation system.
There are a number of anomalies that you come across when you examine the op-eration of the Australian superannuation system.
The first relates to the executives who spend their working lives helping Austra-lians dealing with our complex superannuation. These are the handsomely paid fi-nancial services executives who have most to gain from the continuing boom in superannuation.
And booming it is. The latest figures from the Australian Prudential Regulation Authority (APRA) show that the amount of money in superannuation grew 14 per cent in the last financial year to surpass the $400 billion mark. That means that more than $35 billion passed through the hands of superannuation fund trustees, fund managers, financial planners and investment consultants last year.
And this river is unlikely to dry up in the next ten years as the baby boomers move into their retirement years, underpinning the continued good health of the financial services industry over the coming decade.
But while the financial services industry has a love affair with the rivers of money filling the collective honey pot, they don’t think much of the system that fills the coffers. In fact, from a straw poll conducted by Money Management, we have found that most of these highly educated and usually intelligent executives don’t invest one cent more in superannuation than they absolutely have to under the su-perannuation guarantee. That is, those that have most to gain from the continued good health of the superannuation system do not use it for their own personal in-vestment strategies. Moreover, it is those that understand the system that choose not to use it.
And who can blame them? The superannuation surcharge has made investing in superannuation only marginally more profitable than investing outside of the su-perannuation system for high income earners. And investing outside super means you don’t have to lock up your money for 20 years.
This brings us to the second anomaly. The Government has been making noises about how they would like to see the superannuation system ease the burden of the social security and health systems of the future. At the same time, the Government has made the system so unattractive to high income earners that they refuse to place their hard-earned dollars in the system.
It would be naïve to suggest the financial services industry does not have a vested interest in promoting superannuation. But at the same time, the Government should not be sticking with a policy just because it gets up the nose of the industry. The superannuation surcharge is yet to be revenue positive for the Government and will do no favours for future Governments who have to deal with an aging population.
The sooner we see the back of the super surcharge, the better it will be for all con-cerned.
Recommended for you
High-net-worth advisers seeking to grow their businesses are likely to find alternatives to be a key part of the puzzle amid investor demand, according to Praemium’s head of private wealth.
The financial advice profession has lifted back above the 15,500 mark this week thanks to a double-digit net rise in adviser numbers, according to Wealth Data.
A closer watch on licensees that fall short on cyber security protections is among a dozen new enforcement priorities announced by the corporate regulator for 2025.
Research house Morningstar has welcomed a new director for manager research to cover Australian and New Zealand fund managers.
