Opinion: Should superannuation fund nation-building projects?
The Australian Labor government published a consultation paper to legislate the objective of superannuation funds to deliver sustainable retirement outcomes on February 20.
The contents of the proposal, as outlined in a speech by Treasurer Jim Chalmers on February 20, are already receiving mixed reviews and could perhaps be neglecting the wishes of individual members.
As part of the delivery on this proposal, the Australian government is looking at ways to essentially block the early release of retirement money to citizens during times of economic downturn or to buy their first homes.
Chalmers also said the government’s proposed reforms of the superannuation system would enable investment by super funds into “nation building” projects that boost housing supply, manage climate change and spur digital transformation.
On the face of it, these proposals might be accepted by the super sector, but it is likely to be only for public consumption.
There is no doubt that super funds are interested in improving their community and country, but they will likely only participate in these projects where it is obvious they will be able to deliver the best financial returns possible for their members.
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In recent years in particular, with the introduction of dashboards and heatmaps by the prudential regulator, Australia’s super funds are very heavily scrutinised on their performance which has led to waves of consolidations within the sector.
Another point to note is that executives of super funds will not be motivated to back “nation building” ideas that aren’t guaranteed to deliver strong returns, as their own salaries are predominantly based on relative returns.
As former banker David Murray said, “If affordable housing schemes were attractive investments for superannuation funds, they would already be putting money into them.”
The proposal to halt the early release of individuals' retirement money has also run into opposition from various quarters.
During the pandemic, Australians were allowed to withdraw up to A$20,000 from their super over two years to help with living costs.
The pandemic policy proved to be incredibly popular, with about A$36 billion drawn during the two financial years the super withdrawal scheme was in operation.
Chalmers, however, labelled the early withdrawal of billions as a “disastrous policy” of the former coalition government and ultimately served to deplete people’s retirement savings in a speech on February 20.
Labor’s proposal to lock in retirement savings has already received a lot of support from some of the country’s regulating bodies and super bosses.
HESTA chief executive Debbie Blakey has publicly supported the proposal and argued that superannuation savings should be for retirement and not used for things like buying a home. During the pandemic, many of the HESTA’s members took advantage of the super withdrawal scheme and drastically depleted their balances.
Also read: Australia's super industry an incredible experiment: State Super CEO
While the government and others might be of the view that Australians exercised their right to withdraw from their super funds too freely during the pandemic and might do so if given the option to secure a house — the fundamental reality remains that the A$3.3 trillion in superannuation savings belongs to workers and not to the super funds or the government.
Many argue, that the money that is placed into these funds belongs to the Australians and they should have the right to have it managed with their best interests at heart.
Opposition financial services spokesman Stuart Robert said on Monday the Coalition supported enshrining a definition for super, but that it should be focused on individual Australians.
"We agree there should be a purpose, and it should be about the individual and how the individual uses their money, not how the treasurer wants to use their money for his purposes," he said.