Reduce complexity in superannuation, think tank warns

By Cameron Micallef

February 13 2020
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Given the strength of the current superannuation system, Rice Warner believes the industry does not need major reform, instead it needs to be made more efficient.

In its submission to the Australian government, Rice Warner said reducing fees, creating joint accounts for couples, establishing default pensions accounts, reviewing financial advice and reviewing the role life insurance plays within superannuation need to be prioritised.

The think tank noted that raising the superannuation guarantee could make members worse off in retirement due to an offset by the pension.

“When the superannuation guarantee (SG) is raised to 12 per cent, for many members, some of the benefit will be offset by a reduction in Age Pension payments.”

“The impact is complex and outcomes are not readily quantifiable since retirement outcomes for members vary depending on many other factors, including the rate at which the member withdraws their savings during retirement,” Rice Warner said.

The think tank said a better solution would be to reduce the complexity around the system, reducing fees to help grow balances.

“Superannuation documentation is difficult to follow due to the complexity of the legislation and the industry jargon. [The] Australian Securities and Investments Commission (ASIC) should consider providing a standard booklet on many of the sections of Product Disclosure Documents and allow funds to remove this text from their documents,” the think tank continued.

The submission also highlighted the importance of home ownership for members, with any growth in superannuation being offset by the reduction in home ownership.

“Apart from not needing to pay rent, home owners hold an asset which can be used later in life to supplement income (through home equity release) or to pay for Aged Care services (through equity release, sale or rental).”

“Previous research prepared by Rice Warner for the Actuaries Institute shows that growing superannuation balances at retirement will be partly countered by a reduction in levels of home ownership,” Rice Warner said.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement