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The Coalition's plan for real action on superannuation



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The Coalition’s Plan for Real Action on

Superannuation

T h e C o a l i T i o n ’ s P l a n f o r r e a l a C T i o n o n s u P e r a n n ua T i o n 2

EXECUTIVE SUMMARY The Coalition supports a ustralia’s three-pillar retirement system comprising an aged pension, a compulsory system of retirement saving through superannuation and incentives for voluntary saving.

The introduction of compulsory superannuation in a

ustralia was a ground-breaking reform. i

t provided

a system for

a

ustralians to build wealth towards a comfortable and self sufficient retirement.

s

uperannuation reduces a

ustralians’ long-term dependence on government support, which helps underpin the sustainability of government finances. The Coalition wants to encourage as many a

ustralians as possible to plan and save for their retirement, and to take full advantage of the benefits the superannuation system offers.

We are proud of our record on superannuation. When last in government the Coalition introduced reforms to enable a

ustralians to choose their own superannuation fund. We oversaw payments and incentives that encouraged a

ustralians, especially a

ustralians on lower to middle incomes, to make

additional contributions to their retirement nest egg.

The l

abor Government has seriously reduced the ability of individuals to contribute to their retirement savings. i

n the 2009-10 Budget, l

abor halved the concessional contribution caps and temporarily cut back Government payments under the co-contribution scheme by a third. There are many inefficiencies in the system which the

l

abor Government has failed to address.

This ineptitude is typical of the poor standard of economic management of the l

abor Government. This

government has overseen a calamitous deterioration in a

ustralia’s fiscal position. i

t has squandered

billions on poorly conceived and poorly administered programs. i

t has overseen the fastest build up of

debt in a

ustralia’s peace time history. i

t has left a heavy burden on taxpayers to service and repay the

debt.

The Coalition knows that the interests of superannuants and the industry are better served by opposing l

abor’s mining tax and carbon tax and by implementing the Coalition’s plan to lower the company tax rate from 30% to 28.5%. a

ustralia cannot afford another three years of backward steps and policy paralysis on superannuation.

The next Coalition Government will take r eal a

ction to make a

ustralia’s superannuation system work

better.

The Coalition will:

1.

Abolish the Superannuation Guarantee age limit1 2. R equest the Australian Office of Financial Management to examine issuing bonds for terms of up to 30 years 3.

Consider

and respond to the Cooper review2 recommendations before the end of our first term of government 4.

R

elease Treasury modelling of the impact of the Henry review’s recommendations3 for

superannuation, to contribute to a fully informed community discussion

1. undertakings 1 and 2 have already been announced as part of the s upport s eniors plan. 2. http://www .supersystemreview.gov.au/content/content.aspx?doc=html/papers.htm 3. http://taxreview.treasury.gov.au/content/Content.aspx?doc=html/home.htm

T h e C o a l i T i o n ’ s P l a n f o r r e a l a C T i o n o n s u P e r a n n ua T i o n 3

HOW LABOR HAS FAILED Government must set a good example if it wants to foster a culture of saving among citizens.

The l

abor party talks about the importance of saving, but its profligate borrowing and spending in

government has set an appalling example for a

ustralians, who already save relatively little by international

standards.

l

ast year l

abor oversaw the biggest budget deficit since the s

econd World War. This year the government

proposes to borrow another $41 billion, yet the need for stimulus has long since passed.

l

abor has broken a promise from late 2007 to change superannuation “not one jot, not one tittle”.

i

t did so several times.

for example,

l

abor has:

•

halved

the concessional contribution caps, penalising thousands of a

ustralians who inadvertently

exceeded them and undermining

a

ustralians’ incentive to save for retirement;

•

cut back government co

-contribution payments, discouraging low-income earners from saving;

•

mandated

that industry funds be the default superannuation fund for the bulk of Modern a wards,

curtailing competition among funds; 4

•

promised

to tender the role of superannuation clearing house to the private sector, but instead

gave the contract to Medicare; and

•

l

abor’s tampering has undermined certainty and discouraged

a

ustralians from saving.

4. industry funds are default funds for 84 per cent of modern awards: institute of Public a ffairs, Keeping Super Safe. http://www.ipa.org.au/publications/1794/keeping-super-safe/pg/3

T h e C o a l i T i o n ’ s P l a n f o r r e a l a C T i o n o n s u P e r a n n ua T i o n 4

THE COALITION’S PLAN FOR REAL ACTION ON SUPERANNUATION The Coalition wants to reform the superannuation system for the long-term.

We want to get the balance right between compulsion and efficiency on the one hand aand competition

and transparency on the other.

The

h

enry and Cooper reviews offer sound templates for reform and are worthy of careful scrutiny.

The Coalition’s plan for real action on superannuation includes the following key elements:

1.

Abolish the Superannuation Guarantee Age Limit

The

Coalition has already announced that it will abolish the s

uperannuation Guarantee age limit

from 1 July 2013. The current age limit on the s

uperannuation Guarantee unfairly discriminates

against older workers and effectively reduces their income.

The s

uperannuation Guarantee currently only applies to workers up to the age of 70. u

nder the

Coalition’s plan, the s

uperannuation Guarantee charge will apply to any employed worker, no

matter his or her age.

2.

R

equest the Australian Office of Financial Management to examine issuing bonds for terms

of up to 30 years

a

s part of its s

upport s

eniors policy, the Coalition has announced it will direct the a

ustralian

o

ffice of

financial Management to examine issuing bonds for terms of up to 30 years.

This

policy will have two beneficial results. first,

it will increase the range of retirement products

available to retired a

ustralians. a

t the moment, the maximum term for government bonds

in a

ustralia is 15 years, which limits the period for which retirees can make a highly secure

investment in government bonds.

s

econd, the issuance of longer-dated government bonds will provide the financial services

industry with greater scope to develop insurance and retirement products that suit the needs of

a

ustralians in retirement.

3.

Consider and r

espond to Cooper review recommendations before the end of our first term

of government

The Coalition recognises the merit of many recommendations in the recently published Cooper

r eview

.

We will consider and respond to the r eview

’s 177 recommendations in government, when we have

the ability to discuss the likely financial and economic impact of individual recommendations

with

asi

C,

a

P

ra

and the Treasury.

T h e C o a l i T i o n ’ s P l a n f o r r e a l a C T i o n o n s u P e r a n n ua T i o n 5

The s uper s tream proposal and any other measures which deliver greater efficiency in the sector

are worthy of further consideration. a

n increase in the efficiency of the “back office” functions of

superannuation funds will lower costs. i

t will also make it easier for fund members to transfer

between funds.

The details and implementation must be worked through by consulting directly with industry

and consumer groups.

o

n 1 a

ugust l

abor announced that if re-elected they would facilitate new low cost, simple

superannuation products called My

s

uper. s

uperannuation funds would be able to offer a low-

cost option to fund members who do not select a retirement fund. The Coalition believes there

should be full discussion with the industry about the My

s

uper proposal.

4.

R

elease Treasury modelling of the Henry review’s recommendations for superannuation

The h

enry review of a

ustralia’s tax system contains a set of recommendations for superannuation.

The r eview

proposed significant changes to the taxation of superannuation to make the system

fairer, simpler and more effective. for

example, the r eview

states “the recommended changes to

the taxation of superannuation would increase private savings more than would an increase in the

superannuation guarantee rate to 12 per cent under the current tax arrangements”.5

in government the Coalition will release Treasury modelling of the individual recommendations

and issue a response, with a view to making changes.

a u thorised and printed by Brian l o ughnane for the l i beral Party of a u stralia, Cnr Blackall and Macquarie s t s, Ba r To n a C T 2600.

5. [1] h enry r eview , page 114