Clockwise from top left: Angus Taylor, Misha Schubert, Joseph Mitchell and Andrew Bragg.

A seemingly innocuous comment from Shadow Treasurer Angus Taylor over American-style 401(k) retirement plans has sparked industry debate over how flexible superannuation should be for individuals. 

Reporting on comments made by Taylor at a guest lecture on Wednesday night, Professional Planner editor-in-chief Aleks Vickovich (speaking below to Perth’s 6PR on the issue) noted that a reference to US-style 401(k) voluntary retirement savings might have been a subtle hint at the Coalition’s future plans for the Australian retirement system. 

Taylor’s office reached out to Professional Planner to say that the Shadow Treasurer’s comments in relation to 401(k) products were strictly in the context of using them to allow withdrawals to purchase a first home. 

“The Shadow Treasurer’s comment was limited to the rule around using super for housing,” a spokesperson said.  

The spokesperson pointed to comments made by Taylor to the financial services industry – including at the 2023 ASFA Conference and 2024 SMSF Association conferences – that superannuation is compulsory, and that isn’t going to change. 

But a media release from the Australian Council of Trade Unions on Friday morning said Taylor’s comments showed it was the “strongest signal yet” from the Coalition that it “would dismantle and Americanise Australia’s compulsory superannuation system”. 

The ACTU argued the comments showed that treating retirement savings as an employment perk and not an earned entitlement was still front-of-mind for the Coalition. 

“By him objectively saying that he’s looking at bringing Australia into the 401(k) system, which is not respected in the US, shows that it’s an ideological distrust of superannuation as a policy for retirement savings,” ACTU assistant secretary Joseph Mitchell tells Professional Planner. 

In the US, 401(k)s are optional retirement vehicles – unlike Australia’s compulsory system – but the ACTU argues they’re also plagued with high fees, low returns, and are often misused. 

“The thing that makes this really newsworthy is that for a really long time the opposition, the Liberals, have been putting in-place policy proposals and taking to the election policies which undermine the fundamental pillars of the superannuation system, which [are] preservation and universality and compulsory contributions,” Mitchell said. 

“All of those things are critical for superannuation to be successful for working people. If you unpick any of those pillars it starts to undermine all of the pillars.  

“If it becomes optional to preserve superannuation for retirement again, we’ll return to a pre-compulsory super regime where only the rich had access to superannuation and retirement funding.” 

Super Members Council CEO Misha Schubert said in a statement any policy that undermines key principles of super – compulsion, preservation and universality – would make Australians poorer in retirement.  

“Leading US financiers like Blackrock’s Larry Fink and countless other global experts envy Australia’s system for a compelling reason: it enables a dignified retirement for all Australian workers – not just the wealthy,” Schubert said. 

“We urge the Shadow Treasurer to make clear the Coalition is not seeking to make Australia’s super system more like the inequitable US 401k system which leaves millions of Americans without any retirement savings. And we call on the Coalition to swiftly restate its commitment to compulsory super and rule out any policies that enable people to opt out of the system.” 

However, in some form of defense of the Shadow Treasurer, NSW Liberal Senator Andrew Bragg said during a recording for an upcoming episode of the Professional Planner Shape of Advice podcast that the Coalition’s position is that superannuation must be more flexible for individuals, and the concept of a 401(k)-style vehicle fits that view. 

“I think the idea is that we would have a retirement savings scheme that is similar to what you see in other jurisdictions, like in Singapore, like in Canada, for example, where, sure, you have the pension fund, but the pension fund can provide insurances and housing and aged care and other things,” Bragg said. 

“I think that is eminently sensible. I mean, super is so rigid because it’s been designed by vested interests. It’s been designed by people who want to plunder the funds. It needs to be working for the people, not working for the industry.” 

Fear of running out 

Opponents of compulsory super have argued that employees should be allowed to choose where their money goes, and that they may have more urgent need for it in the present than in retirement. 

However, Mitchell said it would not necessarily follow that if retirement saving became optional, the money otherwise saved would end up in workers’ pockets.  

“If superannuation were not in place, the simple fact of the matter is people just would not have that right,” Mitchell said. 

“There is no guarantee that it will reflectively flow back into wages. Working people are better off for having compulsory employer-paid retirement savings. 

“You will never talk to a retiring worker saying, ‘Gee I wish I had less super’; you’ll never talk to a retiring paramedic, nurse or teacher who says that actually, ‘I would’ve had the opportunity to do this if it weren’t for this scheme’.” 

When it comes to the amount people are saving – and the risk of oversaving – Mitchell argues this is a misconception. 

“You see the Grattan Institute say that people are oversaving but they base that off a 40-year uninterrupted career, and about half of Australia’s workforce does absolutely not have a 40-year uninterrupted career because they are women with caring responsibilities,” Mitchell said. 

What’s the purpose? 

At a Political Series breakfast hosted by Conexus Financial, publisher of Professional Planner, in February 2023, Treasurer Jim Chalmers announced plans to legislate the purpose of super as a means to “end the super wars”. 

The definition of the objective included in legislation was to “preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”. 

The bill has passed the lower house but is yet to be listed for debate in the Senate. 

Mitchell said the super wars are only continuing because of a subset of “one party”, alluding to parts of the Coalition who have been opponents of compulsory superannuation. 

“The vast majority of Australians support super [and] the objective [of super] is deeply important,” Mitchell said. 

“We already know, in the popular understanding of superannuation what the purpose of the system is, and what Australians are sick and tired of is politicians tinkering around the edges of the system whenever they come up with a policy problem that they don’t want to spend government money on or come up with real solutions for.” 

Mitchell added the Coalition had frozen Superannuation Guarantee contributions for years, that it “planned” to let workers “raid” super for housing, and that women should be able to use super to deal with the costs of domestic violence or divorce. 

“All of these policy proposals are because there is a lot of money in superannuation and it’s easy to throw a lot of somebody’s else money at a problem,” Mitchell said. 

One comment on “Shadow Treasurer receives swift rebuke from compulsory super true believers”
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    Wayne Leggett

    Compulsory super was introduced to take the pressure of funding people’s retirement away from the public purse, via the Age Pension. If retention of super for retirement isn’t compulsory and, as a result, less people retire with insufficient means to fund their retirement, covering the shortfall will be done by the Age Pension. Let’s not undo decades of hard work in this space to try and fix a problem in another area. In any event, allowing access to super to assist in funding a home purchase can only lead to increased prices, so it’s a “band-aid” solution, at best!

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