Is choice really the issue in super?
One ofthe most watched issues in financial services has been member investment and funds choice when it comes to superannuation.
The issue was dragged back to the front pages recently when Labor Senator Nick Sherry outlined the Opposition’s guarded position on the matter and indicated it would consider choice, but only with certain safeguards.
But as the headline above states, is choice really the issue for superannuation? No-one in the industry would debate the need for super and while choice may provide a wider investment universe to consumers, it will not provide the extra boost to retirement savings that people need, since it is not seen by the public as being a real incentive to grow their super monies.
At the moment, the market has taken the idea of choice and in some cases already offers it. If this continues, any political discussion about choice will merely become an academic exercise.
But if either the Government or Opposition was truly serious about creating incentives for people to voluntarily contribute to their own super, they would attack the taxation of super.
It is no secret that super is taxed on the way in, higher for those with the surcharge, it is taxed while invested and then again on the way out of the fund, which is an odd situation for monies that are supposedly required by law to be put aside until retirement for the benefit of the consumer.
Of course, this and any future Governments, regardless of party ideology, will be reluctant to give up this lucrative cash cow. But to continue to urge the public to put more in super for retirement while taxing it across the board is just plain wrong.
And this is where the financial planning and funds management industry must act. As people at the coal face of savings and investments, it is imperative that choice does not become a diversion and that consumers and policy makers are fully aware of the impact of carving out small pieces of superannuation savings on a recurring basis.
The future prospect of a social security system crippled by an ever more dependent baby boomer population is well documented. To inflame the problem by dipping into super to solve the problems of today is not just a case of short-term thinking, but also reveals a shocking lack of understanding about the future.
AUTHOR
Jason Spits
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