The Association of Superannuation funds of Australia (ASFA) has “urged caution” over a proposal to allow former tertiary students access to their superannuation funds to pay off HELP debts. There’s a kind of code embedded in these sorts of statements and press releases.
Just as in Yes Minister describing an idea as “courageous” was Sir Humphrey Appleby’s way of telling Jim Hacker that it would lead inevitably to political catastrophe, so “urged caution” is code for “Well, we can’t just come right out and say it, but we think the idea reeks”.
ASFA is right to call for caution, but prompting a debate over the purpose of superannuation is a timely and worthwhile idea. You may recall that David Murray, in the final report of the Financial System Inquiry (FSI) said we need to know what we want the superannuation system to do before we can say whether it’s doing that. That view has bipartisan political support.
It may be that now is exactly the right time for all ideas like this to be tossed into the ring, if only so they can be put to one side as the purpose of superannuation is clearly defined.
Should superannuation be solely a mechanism to fund retirement incomes? Should it be a vehicle to enable the tax-effective intergenerational transfer of wealth? Is it there to create a pool of savings to ease the financial burden on families by allowing early access to pay the deposit on a home? To pay off HELP debt? To fund private school fees? To buy a car? Pay for an overseas holiday?
Some of those ideas seem more ridiculous than others, but no one has yet formally defined where the line is that should not be crossed. We kind of instinctively “know” that early access to super to buy a car is not right; but on the wrongness scale, where do we place access to pay a deposit on a home, or to pay for an education?
From a financial planning perspective, a debate like should be welcomed – hence ASFA’s temperate language, probably – and in some respects the narrower the definition of the purpose of superannuation the better.
If it’s absolutely clear that super is for one thing and one thing only – let’s say for the sake of argument that it is solely to fund a retirement income and, furthermore, that a retiree’s capital should be consumed over the course of their retirement – then there will be greater demand for advice on other forms of planning, saving and investing.
If superannuation cannot be dipped into more or less at will to solve all of life’s financial demands – including education, housing, and health – then individuals will need to find other ways to meet those needs.
That would be a good result for financial planners, but only as as long as financial planners are where people naturally think to turn for advice.
