Cbus submission to Treasury - The objective of superannuation
15 April 2016
This opinion piece by Cbus Chair, the Hon. Steve Bracks AC appeared in The Australian on the 15th April 2016.
Super objective
Done properly, the government’s intention to establish an agreed and enshrined objective for superannuation should facilitate the ambition of ensuring a comfortable retirement for all Australians and supercharge economic growth in Australia.
When Paul Keating established compulsory superannuation in Australia in 1992 very few understood how far reaching and critical an economic reform it would be. The amount Australians have in superannuation is expected to hit $9 trillion by 2040 and represents a prized national asset. It is already saving the budget $7 billion annually through reduced Age Pension payments.
This one policy has made huge strides in addressing what is still a perennial problem in Australia of low national savings. It has also made sure Australia is better placed to deal with our next great challenge - the ageing of the population.
That is why the release of the discussion paper by the Federal Government on the overall objective of superannuation comes at such a critical time. A pause and rethink about what the objectives for our superannuation system should look like, now, and into the future is timely. It provides an opportunity to lock in the economic gains of the current system while reaffirming what Australians want the system to deliver.
As Cbus Chair I am responsible for the oversight of the retirement benefits of 720,000 Australians, predominantly working in the construction sector. Our members are overwhelmingly males who work in an industry where intermittent work patterns are often the norm.
The challenge of providing a comfortable retirement for them is one that will require continued improvements in the superannuation system. As it stands today less than 6% of Cbus members aged 60 or over have reached a comfortable level of retirement in their super balance alone.
But the system is young. It only commenced in 1992 at 3% of salary and it only reached 9% of salary in 2002. It will be 2040 before most Australian’s retire having put aside 9% or more of their wages throughout their working life.
The move to the 12% Superannuation Guarantee Charge cannot come too quickly for our members.
Compulsory superannuation has always been about thinking about the big challenges facing Australia. At Cbus we think there is also an opportunity to think broadly about the economic dividends a carefully crafted superannuation policy can deliver.
Providing a large pool of money to invest in Australian businesses reduces our reliance on foreign capital. The long term nature of superannuation industry super funds means we can look at investments with a different eye than the banks and other investors. They often have short term investment horizons unsuited to the patience needed to invest in fixed capital.
Industry funds are increasingly directly investing in infrastructure to deliver stable financial returns to our members. Cbus, for example, holds both a direct and pooled investment share of Sydney and Wollongong Ports bought from the NSW Government – a business we expect to partly own for decades to come. It will provide a steady flow of dividends to Cbus members and frees up Government to reinvest that capital into vital new infrastructure.
Like the virtuous cycle of Cbus investing in property development, creating value for fund members and jobs in the construction and building industry which in turn drives economic activity, the superannuation system’s ability to help build our nation’s infrastructure will benefit us all through productivity gains, jobs and increased living standards.
The Federal Government needs to consider then in terms of settling a final set of objectives for the superannuation system with the goals of maximising retirement incomes, building national savings and the nation building investments that our super system can deliver.
Finally the government should acknowledge that we must continue having Australians’ retirement incomes managed by organisations whose first loyalty is to fund members and the financial returns on their investments not shareholder returns. This is particularly necessary to protect the retirement savings of those who don’t or feel unable to make an informed choice of fund.
For more information see the Cbus submission to Treasury (PDF).