Super not just for the employed

THE employment and spouse tests applied to superannuation are still excluding a large group of people, according to Praxis Partners’ Keiran Dell.

Dell, who was previously head of the Australian Retirement Income Streams Association (ARISA), says that while the tests cover many people the only ones left out are those who fall into the categories of the unmarried and unemployed.

However, when these two areas are explored further the superannuation tests can exclude the unmarried long-term unemployed, unmarried long-term welfare recipients, people over 75, those disabled after finishing work, those in voluntary work, unemployed divorcees and those never married and employed.

However Stuart Milne, also from Praxis Partners, questions whether these groups of people would use the super system if it was made open to them and says that less than a third of men and a fifth of women in the workforce make personal voluntary contributions to super.

“This means that 70 to 80 per cent of the working populace are doing nothing extra with their superannuation and the question is why?”

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Milne says many of the above group, about 40 per cent, say they cannot afford extra contributions, while about a fifth did not see it as urgent, with the remainder split along various reasons including ineligibility or having other investments.

However, he says, despite a lack of widespread interest in superannuation, there would be benefits in opening up the super system to those currently excluded.

These benefits would include creating access to retirement income systems and a regulated savings environment that has been designed for retirement.

Milne says it would also reduce the costs for fund trustees because they would not have to engage in employee verification tests, which in turn would reduce system costs.

“If there are lower fund costs, which in turn means lower costs for consumers and the industry pledges to return those cost savings to members and not the bottom line, such moves would get Governmental support,” Milne says.

Dell says the easiest way to open superannuation to more people would be to apply a taxable income rule so that any person with taxable income can contribute.

Alternately, he says, there could be changes to the Superannuation Industry Supervision (SIS) Act that would consider the age in which a person left a fund as the criteria. This step would be safeguarded through reasonable benefit limits (RBLs), age-based contribution limits and preservation conditions on release of funds.