The case for putting super front and centre

By Grace Ormsby

June 03 2020
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Super fund members could be better supported and life insurance could become less expensive if the full power of Australia’s $2.7 trillion retirement savings pool is better harnessed to “turbocharge” economic recovery nationwide, according to a new report.

The case for putting super front and centre

The Financial Services Council (FSC) has unveiled its own economic plan aimed at boosting the use of retirement savings as a tool for infrastructure, while helping vulnerable consumers to rebuild their retirement nest egg and remove additional cost burdens on life insurance policies and property transactions.

It’s asking the national cabinet to consider abolishing stamp duties not only on property transactions but on life insurance, too — which in itself costs Australians $644 million per year and erodes superannuation savings by more than $230 million per year.

The report calls stamp duties “a volatile revenue source for state governments, unsuited to funding the services they are expected to deliver”.

The FSC has argued that stamp duties on products issued by life insurers discourage many Australians from adequately protecting themselves and their families from hardship, noting such a cost is “recognised as one of the most inefficient taxes in the economy”.

It also considered that stamp duty on property transactions acts as a substantial barrier to the merger of superannuation funds, and overall reduces the efficiency of the system.

In addition to the abolishment of tax, the report has requested the establishment of a co-contribution scheme for Australians who have needed to access their superannuation early to better incentivise and enable the “topping up” of affected individuals’ super.

According to the FSC, such a scheme would see the government contribute $1 for every $5 a member contributes, up to a maximum of $10,000 in member contributions.

Shining a light on the recent hit to superannuation savings taken by the sector and super fund members, especially where market volatility has “disproportionately impacted Australians close to retirement and those who have accessed their savings early to alleviate hardship”, the FSC also advised that older Australians should be offered a once-off higher superannuation cap of $50,000, to be “carried forward” if unused.

For FSC CEO Sally Loane, the superannuation industry “could prove to be a vital tool in the road to recovery” for the Australian economy.

She said the FSC had developed a plan to democratise investment in critical domestic infrastructure development, making these projects not only attractive but also accessible to every Australian with money in superannuation.

It would involve the creation of new “Australian Superannuation and Infrastructure Investment Vehicles (ASIIVs)”, which are designed to provide governments with additional sources of capital and expand access to existing asset recycling programs to all categories of superannuation investors.

According to the FSC, it will both free up capital for investment in new infrastructure projects as well as do away with a need for institutional investors to own infrastructure.

Ms Loane said such vehicles “will unlock a large chunk of funds — around $1.7 trillion in choice and self-managed superannuation funds (SMSFs) — for infrastructure projects from investors who today have limited access to them”.

“ASIIVs will allow the national cabinet to turbocharge asset recycling programs by selling assets into a common vehicle to finance new job-creating infrastructure projects. They will also enable the creation of tailored vehicles for greenfield projects, such as community housing,” she further explained.

“By implementing the reforms raised in this report, the national cabinet and Commonwealth government can get the best bang for the nation’s buck and get Australia back up on its feet.”

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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