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Confusion over superannuation as New South Wales Government opens a new scheme and the Federal Coalition announces changes to the Fightback policy

MATTHEW ABRAHAM: Almost certainly, the biggest problem with superannuation in this country, has been the confusion and uncertainty brought about by change after change after change, and sadly, more change now looks likely. On the super shemozzle front today, we have several major developments. The Liberals have announced changes in the Coalition policy, which amounts to a back-flip on lump sums. The New South Wales Government has opened a new scheme, probably because the old State scheme has $14.5 billion in unfunded liabilities. A claim has been made that the Government's advertising campaign for the superannuation guarantee levy is misleading, and there was a survey showing investors will probably get no return on their investment because funds for the last five years have failed to keep pace with inflation. What a mess!

Daryl Dixon is our resident in-house expert on all matters relating to super. He has just launched another book titled 68 Super Strategies . Well, can we go first to the Government's SGL advertisements, the ones showing a tree growing and yielding fruit. What is wrong with them?

DARYL DIXON: They should be depicting stunted mallee bushes, Matthew. We have just heard Noble Lowndes, one of the leading research studies, showed that over the past five years, super funds have barely kept pace with inflation. One or two have done slightly better, so superannuation isn't the process of planting the little seed, growing into the big tree, that the Government depicts. It's false advertising.

MATTHEW ABRAHAM: Now, there is also a problem in that the SGL isn't up yet.

DARYL DIXON: That's right. Basically, I think any private sector would be before the courts by the Securities Commission, for the sort of advertising that has been going on. They are presuming that it is going to be brought into legislation. The Tax Office is acting on that part. That's why, in my book, I just warn most people, just to be careful, watch for the next election to see whether Hewson wins, and they don't have to put any money for the SGC in till 30 June 1993. So, I wouldn't be paying until the legislation is in.

MATTHEW ABRAHAM: Now Daryl, you have been quite complimentary or positive about the Liberal proposed policy under Fightback, on super, and particularly the way that they had intended to restrict lump sum access for high flying executives, to around the $300,000 mark. Now, over the weekend, we have seen a huge back-flip, lifting the ceiling to some 2 million. Are you disappointed?

DARYL DIXON: Well, in a sense Matthew, I am glad that they have spelt out their policy. Senator Alston has always said that he would have transitional arrangements, and obviously, he has now spelt out the transitional arrangements. He has said they will apply from 1 July 1994, which puts him uniform with Mr Dawkins. His proposals seem to be no different to Mr Dawkins' proposals as regards transitional arrangements to protect people with large benefits already, so that is what he seems to have done over the weekend.

MATTHEW ABRAHAM: But the fact that we are meant to be moving away from being able to grab big lump sums. Is that a backward step?

DARYL DIXON: Yes, that's a backward step. I would hope that the Liberal and the Government do come out with much more encouragement for people to take annuities, but it looks as if anybody with a large lump sum today, is going to escape scot-free under either the Coalition or the Government.

MATTHEW ABRAHAM: Now, do you think that was just to head off this panic anyway, with executives taking their packages and maybe re-entering the industry?

DARYL DIXON: Definitely so. I have seen so many people retiring. I was talking to thirty-six last week and of that thirty-six, twenty-three were going to go. I hosed them down a bit and said, at least wait till 1 July 1994. There would have been a mass exodus out of one organisation. I think it was designed to do that. The other Coalition change is absolutely brilliant. For example, bringing down that 25 percent rate to 20 percent is a great improvement. That didn't get very much attention but they have listened to criticism.

MATTHEW ABRAHAM: This is the tax rate.

DARYL DIXON: That is the tax rate.

MATTHEW ABRAHAM: Alright, now on to the New South Wales Government, which has, out of the blue, brought down the hammer on the State funded scheme. What is going on there?

DARYL DIXON: Well, this is bad news for all public servants, and wonderful news for taxpayers. New South Wales has said virtually, Keating is legislating compulsory super, stuff it, we are going to abolish our own government super scheme. It's not advertised like that on page one of the newspaper, but it should be because effectively, what they have said, from today onwards, there is no generous government super scheme. That has all gone. New South Wales employees signing up today get 4 percent super compared to a previous employer contribution of 14.5. Which would you prefer, Matthew?

MATTHEW ABRAHAM: Yes, well no comment. Now, is it true that the New South Wales scheme, basically we have got $14.5 billion unfunded?

DARYL DIXON: Yes, and the Commonwealth would have a lot more than that, and South Australia - I can run through the list of organisations. South Australia, Victoria, Tasmania, West Australia - all of those State Governments in diabolical financial problems. It is something that I predicted in my 68 Super Strategies where I said employers will now look very closely at the costs of their superannuation, and that is what New South Wales has done.

MATTHEW ABRAHAM: Now, we have seen a change of course from the CSS to the PSS, the new scheme for federal public servants, but do you think, even that new scheme is generous, compared to many private sector schemes? Do you think that with a change of government, or even under the existing government, we could see a similar chopping off at the knees of that scheme?

DARYL DIXON: Yes, and my advice to any resident, any listener in Canberra who is free to join the PSS and hasn't joined, sign up quick. Hannaford, the relevant State Minister, had a deadline of yesterday. Anybody who had signed up for their previous scheme SASS, by that date, joined; if they hadn't signed up, stiff luck, you are a second class citizen. And I think, I don't know what the Coalition will do at the federal level, but there is a great temptation, just simply to go from a very costly super - and don't forget it is related to salary, the PSS, whereas this new State scheme gets whatever the fund earnings will get. It's going to be a little super tree. It probably won't grow very much.

MATTHEW ABRAHAM: A mallee root, maybe.

DARYL DIXON: A mallee root.

MATTHEW ABRAHAM: Daryl Dixon, thank you.