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Tracey Spicer interviews Senator Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology about recent and upcoming superannuation changes including the early release of super scheme, the proposed rise to the superannuation guarantee, what can be done to improve super outcomes for women and the outstanding recommendations from the Royal Commission.
Hi, I’m Tracey Spicer, and today we’re joined by Assistant Minister for Superannuation, Senator Jane Hume. Welcome.
Senator Jane Hume
Great to be with you, Tracey.
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There are quite a few issues in your very large portfolio that we’d like to discuss over the next 10 or 15 minutes. But first, I’d like to go to those comments by former Prime Minister Malcolm Turnbull, who said opponents of the legislated rise in the superannuation guarantee are, I quote, patronising Australian workers. What do you say to that?
Senator Jane Hume
Well, I think that Malcolm Turnbull is of course, he’s entitled to his opinion, but the superannuation guarantee rise, which is already legislated to go up halfway through next year, that was a decision that was made six years ago in very different circumstances.
We’ve heard from the governor of the Reserve Bank, Philip Lowe, as well as the Grattan Institute, as well as the Australian Council of Social Services and even the Industry Super fund lobby itself, who have said that when the super guarantee goes up, there’s pressure on wages and jobs. And that’s a decision that we have to make in the circumstances at the time. Everything that the Morrison government is doing at the moment to get us out of this COVID-led crisis, is to rebuild the economy and create jobs.
And, of course, the super guarantee is going to create a cost on businesses and pressures on wages and jobs. So, look, we hope that by next year that the economy will be flourishing again and we can go ahead with the scheduled increase. That would be our hope. But obviously, it comes at a cost.
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Malcolm Turnbull’s also scathing about the early release scheme, and the ACTU says it will lead to retirement poverty for millions of Australians. If you had your time over again, would you have designed it differently?
Senator Jane Hume
No, I actually think the early release of super scheme has proven to be a lifeline for millions of Australians. We’ve seen about 2.8 million people now access their superannuation early as part of the early release scheme, and they’ve pulled out about $34 billion from the system overall. Now, putting that into context, $34 billion is about a little over 1% of the entire superannuation system. It’s a little bit over the amount that the superannuation industry charged in fees just last year alone.
And it’s a little over a quarter of the amount that Australians contributed to superannuation last year alone. More importantly, though, I think at a time of serious financial crisis and uncertainty, this money, the ability for people to access a little bit of their own savings has been a lifeline for so many.
And we know from the data that people that have accessed their superannuation overwhelmingly have spent it on things like paying down their credit card debt or paying off loans like a car loan or paying off their mortgage or even just building a little bit of a buffer in their savings.
And of course, that form of financial resilience at a time of great uncertainty is really profoundly important, particularly for confidence. And it just makes households feel a little bit more secure that they’ve got control of their financial destiny. So we think that this has been a very successful program.
With these two issues taken together though the critics are saying the Liberal Party fears the growing power of industry super funds on things like climate change and that the party’s determined to wreck the entire sector. Is there any element of truth in that?
Senator Jane Hume
Look, I can’t begin to tell you, as I’ve been telling many, many commentators over and over again, the Coalition is a firm supporter of compulsory superannuation. We too believe that this is a really important pillar of our retirement income system and we want to see it supported in the future. These are very uncertain times and we’ll do whatever it takes to help Australians through that.
But I think, don’t just look at what we say. Look at what we have done.
Now, this government has created more opportunities for people to contribute to their superannuation than any government in the past by doing things like creating the contributions cap through, which you don’t just have to compulsorily put in the amount that your employer allows you to do so. But more than that, right up to the $25,000 cap. So that means that anybody that’s earning up to $263,000 at the moment can contribute more to their superannuation and still get the tax deductions if they want to.
And of course, we’ve also done catch-up contributions. So if you haven’t used all of that $25,000 cap in previous years, you can actually roll over the balance up to three years worth of balance and contribute more in the years when you’re capable of doing so.
Again, we’ve done the same for non-concessional contributions, allowed people to bring forward their $100,000 limits of non concessional contributions to create a one-off $300,000 contribution that the tax has already been paid on.
And of course, we brought in the Downsizer contribution too, allowing people that are moving from their large home to a small home in their retirement to roll that money into their superannuation in a tax effective way.
We want people to be able to contribute more to their superannuation when they’re capable of doing so.
We know that women seem to be bearing the brunt of this economic slowdown. What are some of the measures the government’s looking at around closing the superannuation gender gap?
Senator Jane Hume
Yeah, this is a really interesting one Tracey. I’m very glad you asked that of me. You know, that catch up contributions that I spoke of earlier I think is so important because when women take time out from the workforce, whether it be for caring duties or raising children, whatever it might be, they then get a chance to make up the difference when they have the opportunity and the capacity to do so.
But moreover, I think we have to rethink about superannuation. You know, it was built 30 years ago. The compulsory superannuation system was built 30 years ago. And it was never, never built with women in mind. It was essentially built for a blue collar worker who walks into his first job at 19, stays in the same job for forever and a day, and then retires at the age of sixty five with a gold watch and his retirement savings. It was never built with people in mind that might have a gender pay gap for instance.
In financial services where I used to work, that was the industry that had the largest gender pay gap of all industries. It was never built for people that took time away from the workforce for caring duties. And of course, it was never built for people that tended to want to work part time. Your superannuation is always going to be reflective of your working life, which is why it’s so important to consider superannuation is just one pillar of our retirement income system.
There’s also voluntary savings outside of superannuation. And then there’s the Age Pension as well, which of course tapers to match your retirement savings level. If you retire on less, you get a higher pension, If you retire on more, you get a lower pension. If you retire on lots, you get no pension. And that’s how the system evens itself out.
That’s something that’s actually been considered in, I shouldn’t really speak about this just yet because it’s still under wraps, but the Retirement Income Review speaks about superannuation as a part of an entire system as opposed to a stand-alone. The only thing that people rely upon in retirement. And it looks at issues like adequacy and equity and also sustainability of the system, too.
Are you considering mandating super payouts for people on parental leave?
Senator Jane Hume
Mandating super payouts for people on parental? Oh, mandating superannuation contributions for people that are receiving paid parental leave, is that what you mean?
Well, that’s something that has been considered. Certainly it is probably a very significant equity issue. The government has already considered putting the superannuation guarantee on paid parental leave for public service. Whether that would extend to the private service private sector, well, that’s yet to be considered. But now I do know that it is something that is it is being discussed.
What about fast tracking women in particular to a 15% super guarantee?
Senator Jane Hume
That’s interesting that you say that if we did that, that would be the first time you would essentially have differential tax treatments. And that’s exactly what superannuation is, a differential tax treatments for genders. Now, I’m not entirely sure that that’s appropriate. I think that there are probably better ways to get to where we need to go.
On top of that, we probably need to consider that some of the rules that people are encouraging us to make or the changes that people encourage us to make are based on superannuation balances for people that are in their 20s and 30s.
And, of course, in your 20s and 30s, you’ve got potentially 30 or 40 years ahead of you to change careers, to take a different path and make more contributions. There’s an awful lot of life ahead of you. Making policy decisions with a 40 year timeframe is actually a very difficult thing to do and and often is a very blunt instrument to solve a particular problem.
Let’s move on to the royal commission’s recommendations around financial services and super. Some of them haven’t been implemented yet. What are your top priorities ongoing?
Senator Jane Hume
Well, interesting you should say that obviously the royal commission focused very much on consumer protections and it was things like governance and culture within superannuation. And one of the things that it also focused on is whether superannuation should, you should essentially be, I think the word he used was, stapled. You should have a stapled account to you. Now that echoed a report that came from the Productivity Commission, which is probably the most relevant report or recommendations around superannuation. That Productivity Commission report said that superannuation has served Australians very well indeed, but it certainly wasn’t a perfect system.
But this proliferation of duplicate accounts out there was causing significant costs to Australians. And consistent, underperforming funds that people couldn’t get in and out of, that was a problem. Insurances that were inappropriately applied and also very high fees. And the combination of these things was making our system inefficient. Now, those issues are the issues that I’ve been working on for the last year or so. And through changes like the Protecting Your Super legislation, Putting Members Interests First legislation.
And just a fortnight ago, we passed Your Super, Your Choice legislation that will actually reduce those number of duplicate accounts. Your Super Your Choice, for instance, all that legislation did was remove the ability of an employer to put a clause into your employment contract that said you must be in this super fund.
Because if I want to push trolleys at Coles, I don’t want to be told that I have to be in Rest. I’m quite happy being in Hostplus, for instance.
And the fact that we were being forced into particular super funds meant that that proliferation of duplicate accounts was still going on. So that’s a really big change. On top of that, Protecting Your Super legislation allowed for data matching within the ATO. Using tax file numbers they can identify duplicate accounts. And if there is a dormant account there, a zombie account as the Productivity Commission referred to it, it will then automatically roll that over into your active account. Now, instantly you reduce your fees, you potentially reduce the double insurance premiums.
And it makes it a far more efficient system. And I think that we’ve been very successful in that. The system now looks very different the way it did just a few years ago.
Back to the royal commission’s recommendations. Will the bulk of the government’s response to this be delivered by the end of this year, as was expected as the timeline?
Well, the royal commission recommendations covered far more than just superannuation, and they have been implemented in a sort of staged way. Obviously, the plan was to implement all of the royal commission recommendations by the end of 2020. And then COVID kind of got in the way. We pushed that back by six months. So by the end of this year, the vast majority of the royal commission recommendations will be underway. By the middle of next year they will all be underway.
Minister, thanks very much for your time.
Senator Jane Hume
It’s been terrific to talk to you, Tracey.
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