Coalition Senator Andrew Bragg has argued the government misread the room on the objective of superannuation and in fact it’s an issue the overwhelming majority of Australians are not interested in.
Bragg told the Professional Planner Shape of Advice podcast that pursuing the objective of super over other legislative priorities “speaks volumes of why this government has had so many problems”.
“Defining the purpose of super is a very academic question,” Bragg said.
“Let’s see where it gets to, but my sense is that most of the things that Mr Jones has tried to do have not worked out well and there’s a lot of things he should be doing, like delivering cryptocurrency reforms which I don’t think he’s got any prospect of this Parliamentary term. I don’t think it’s a priority, purpose of super, no one cares.”
Treasurer Jim Chalmers announced at an event hosted by Conexus Financial, the publisher of Professional Planner, that the Labor government would legislate the objective of super to help “end the super wars” once and for all.
The bill defines the objective of super as “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
“The people who care are probably worried about whether they’re going to get their ongoing fees and contributions,” Bragg said.
“I’m sure there are a lot of people who have a very positive view about superannuation because it’s – in their view – something that helps people make good decisions or have judgments forced on them, I understand that. But there’s also very strong commercial motivations here to lock up the money for 40 years and I don’t think that’s in the interest of the Australian people.”
‘The best ideas we have’
With only months to go before an election, progress on the Delivering Better Financial Outcomes reforms – the government’s own take on the Quality of Advice Review proposals – has stalled and the opposition has capitalised on this with their own QAR bill.
“Financial advisers, just like mortgage brokers, play a hugely important and a great role in our system,” Bragg said.
“Given what’s happening in the last few years in the financial advice landscape, the industry can look to confidence about the future, but we need to ensure that we get more supply of financial planners into the system and that’s why getting the [QAR] report recommendations implemented in a bipartisan way is important.”
But Bragg wasn’t sure whether the QAR reforms alone would be enough to increase supply.
“I mean, it’s the best ideas we have,” Bragg said.
“If there are other ideas, I’m happy to see them but we’ve got try and turn on the tap and get more people into the system and the way to do that is to reduce some of the deadweight regulatory cost.
“We want to have deregulation, but we don’t want to lose consumer protection, so I think that’s achievable.”
Cracking eggs to make an omelette
Bragg has been a fierce critic of compulsory superannuation and the industry fund sector, releasing the book Bad Egg: How to Fix Super in May 2020.
Reflecting on the progress in the sector since the book was released – which has included the early release of super scheme during the Covid-19 pandemic, the introduction of the Your Future Your Super performance test, and now the Coalition’s super for housing policy – Bragg said his views largely remain the same.
“I think I argued in that book we should put housing in there, I argued in the book there should be more scrutiny of the funds,” Bragg said.
“I’ve argued in the book that there should be a severing of the link where the superannuation funds are able to fund political organisations and that still goes on.”
Bragg praised the prudential regulator for finally taking action against Cbus by adding extra licensee conditions on the fund due to allegations of misconduct from its associated union, the CMFEU.
“It was important for APRA showed that it was prepared to do its job, we gave APRA strong powers under that legislation,” Bragg said.
“Frankly, they sat on their hands for a couple of years and now they have acted as they should. It seems pretty ridiculous to me that the Parliament has said they’re putting this union into administration.
“It’s not good enough to be a union but yet we’re going to allow them to own 21 per cent of this fund which is a compulsory pension scheme. The idea that CMFEU is allowed to own this fund or own 21 per cent of the shares seems very odd and peculiar to me and is a great matter of public interest and I’m very pleased that APRA is doing some work there.”
Bragg said it was a “great privilege” to be able to manage people’s retirement income in a compulsory environment.
“You’d like to think they will take these obligations very seriously, I’m sure in many cases they probably do,” Bragg said.
“It’s made the case again that board composition and the governance standards probably do need an overhaul because this highlighted a significant structural weakness that a union – which is not good enough to be a union – is still allowed to be on the board and own a major super fund.”
‘An interesting idea in a perfect world’
As a fierce opponent of compulsory super, Bragg has conceded he’s had to toe the party line now he holds a ministerial portfolio.
“As a member of the shadow ministerial team I will restrict my remark to the current policy and that is that we believe that the preservation should be breached for up to $50,000 of people’s superannuation balance and that’s our policy at the moment,” Bragg said.
“I’ve made comments about this over the years, those are my honestly held views but that is not our policy at the moment.”
But Bragg still described preservation as an “interesting idea in a perfect world, maybe”.
“When you look at the fact that 32 per cent of the lump sums that came out of super last year were used to pay up mortgages tells you, you’ve got a pretty big problem with preservation,” Bragg said.
Bragg said superannuants are being “forced to artificially save” in super while simultaneously paying high super fees and high interest costs to banks.
“Are we running this country for people or are we running it for institutions? Sometimes I fear the country is being run by default for institutions. I’m not sure that preservation is going to be the right design feature across the board going forward which is why we have a policy to open super for housing.”
Bragg said there are current plans to open super for other needs beyond housing, but the party has kept an open mind to what “emerges” in the future.
“The key determinant of success in retirement is not your superannuation balance it’s your housing status – it makes eminent sense for us to open up super for housing,” Bragg said.
“For most people their house is the cornerstone of their retirement plan and if you take money out of super and put into a house to buy a unit in your 30s, you’re much better off than having left that money in super. The idea that you have super as your only savings vehicle is very rigid thinking.”
The Senator dismissed the idea that changes to negative gearing or capital gains tax will have a material effect on helping people who don’t have a house to gain access to the housing market.
“Even if you did it, you’d only have a 1 to 3 per cent change in the prices of the houses,” Bragg said.
“In the context of a $11 trillion housing market, it’s pretty immaterial.”
