Stepping up to the plate on super

On the back of calls for increasing the Super Guarantee (SG) for all workers, not just politicians elected from 2004, the Australian Chamber of Commerce and Industry has claimed that moving the SG to 15 per cent could cost 57,000 jobs and $10.3 billion.

In response to what can only be seen as a short-term, the sky-will-fall type of view, the question has to be asked: did the gradual 1 per cent per year increase in SG through the late 90s and into the new century bring on massive job losses?

While undeniably the economy is now navigating different conditions than in the 90s, the answer is clearly that the graduated and planned SG increases did not result in massive job losses.

Indeed, it might well be argued that the gradual, and clearly manageable, ratcheting up of compulsory retirement savings throughout the period actually aided employment growth through filling some of the void left when voluntary national savings continued to decline.

Just consider for a moment what state Australian capital markets might now be in, with household debt at 171 per cent of disposable income, if it were not for the SG. What cries might we then hear from business lobby groups?

There are no surprises in a business lobby group coming out against increasing payroll costs — after all, protesting cost increases is part of what their members seek from such bodies. But this has all been done before through the initial inching up of the SG to the current 9 per cent.

Funds for a few

Reverting to politicians looking after themselves with the SG — and that’s not to mention the pre-2004 pollies with the ‘Rolls Royce’ of Australian retirement funds — the point is that 15 per cent is where the SG should be. If it’s necessary for a backbencher politician then why is it not necessary for the rest of the workforce? Personally, I do not begrudge the increase to politicians, even though it will cost all of us in the form of tax revenue. But disregarding the rest of the workforce is conspicuous in the extreme.

The overriding iniquity in the announcement is that the Government continues to make no effort to address the mathematical inadequacy of the SG for the rest of the working population.

And the Opposition’s relative silence on this issue is simply astounding given the Labor Party’s earlier position on getting super contributions to 15 per cent of salary.

Surely the closeted confines of the Canberra corridors cannot totally obscure the retirement needs of ordinary Australians from the nation’s leaders? Surely those who will ultimately pay tax to fund the SG increase for politicians — the taxpayers — deserve more consideration?

The fact remains that most Australians do not have the luxury of taxpayer-generated Federal Budget surpluses directed to a Future Fund to address past Governmental neglect of defined benefits funding.

Most Australians can only dream of being members of a defined benefit fund where the employer wears almost all the risk.

Most Australian workers are accumulation fund members where they bear all the risk and where a multiple of final average salary as a retirement benefit is not an option. They are members of funds where getting the most into superannuation along the way is the key driver of retirement capital accumulation.

Yet, for whatever reason, many have their hands tied in terms of getting more into superannuation.

Leadership vacuum

The silence, from both sides of federal politics, on SG simply beggars belief.

And as hard as they may try to lobby on the case, in stark reality, financial services industry bodies have limited potency on the subject in Canberra.

In the eyes of politicians and their advisers, and for that matter, in the eyes of the rest of the community, lobbying for SG increases by financial services groups will only ever be seen as a self interested search for larger contribution inflows, with resultant revenue increases for super funds and financial planners.

Be that as it may, fundamentally, of all the areas of business, financial services is most familiar with the mathematical shortcomings of the 9 per cent SG.

Many from within financial services, including myself, continue to be strong critics of the political failure to address such a fundamental problem for the nation.

Leadership vacuum on SG

Yet, complain as we might, in the absence of political leadership on superannuation funding, the time has come for financial services businesses to lead the way on SG.

Quite frankly, we should be putting our money where our mouths and our spreadsheets are.

We should be leading from the front by being seen to voluntarily lift the SG for our own staff from 9 per cent to 15 per cent over the next six years.

Such leadership would do no harm in terms of credibility when financial services lobbyists sit across the table from ministers and shadow ministers and their advisers in Canberra. Being able to talk the talk and walk the walk on SG would afford it the high moral ground.

Negative savings

Looking at the bigger picture, the present level of household savings is a national disgrace.

Concomitant with this is the comparative shallowness of Australian capital markets, if not for SG, otherwise starved of meaningful savings, making the country more and more vulnerable to world macroeconomic and market forces. Witness the tidal wave of foreign capital funding Australian home and investment property loans through 2004 and 2005.

If a conservative Government, ideologically founded on an ethos of individualism, waits for individual Australians to step up to the national savings plate, then it will wait a very long time.

With household debt servicing now sitting at 171 per cent of disposable income there is no surplus income with which to save for the future, and there will be even less when the aftermath of the household debt orgy eventually fully shoots home.

And if a Labor Opposition fails to seize the opportunity to land SG blows against a Coalition Government found seriously wanting on national savings, then to what could we look forward to if there were to be a change of government?

Compulsory superannuation saving via the SG is the most efficient method of leading Australians to the long-term retirement savings table.

With a ‘what you don’t see you don’t miss’ approach to getting the money into superannuation, it is a method that works very well.

The mechanism and the acceptance for this form of retirement savings are largely in place and, as has been previously shown, can be ‘packaged’ as part of overall wage increases.

Business groups might well protest and politicians might choose to ignore the issue of SG increases, but neither can deny the fact that national savings and household debt is a growing catastrophe for this nation.

In a vacuum of political leadership on SG it remains for the financial services industry to step up and be the first to get on with the jobbing of setting SG at a meaningful proportion of salary for its staff.

The only other option is for someone to show the front benches from both sides of parliament how to use a spreadsheet!

Ray Griffin is a Tamworth-based planner and former chairman of the Financial Planning Standard Board International CFP Council.

(For the record, staff of Griffin Financial Services now enjoy SG at 10 per cent, which, unless visionary legislation should intervene to the contrary, will rise to 15 per cent for the 2012 financial year.)