I need to declare an interest: I am a superannuand, and deeply interested in the rules that govern superannuation. So the past few weeks have been more than usually interesting to me, since we were being told that the Government had plans to do something about the superannuation rules. As it happens my superannuation comes from the Commonwealth Government, since I was put in to the Commonwealth Superannuation Scheme when I joined the ANU (a Commonwealth statutory authority) in 1980. My main whinge about super since, and here I am no different to any other CSS pensioner, is that the index used is CPI, not AWE. The Cost Price Index is about half the value of Average Weekly Earnings. I know all the reasons why the Commonwealth uses CPI, but it means that over time I have less and less real money.
I also have a small nest-egg in what was called AGEST and is now Australian Super. This is our buffer against small calamities. I paid in some consultancy earnings and was taxed at 15 per cent. Whatever I take out is tax-free. And this is the bit I worried about. We now learn that the Commonwealth Government proposes to tax the earnings of self-managed super funds when these earnings pass a certain point. I don’t even have such a fund, but many do. On the face of it, what is being proposed has some fairness to it, but everyone who is putting money away for retirement, rather than spending it now, will feel a shiver.
Governments have contradictory aims in this domain. First, they like us to be provident, thrifty and investment-conscious people worried about rainy days and doing something about them right now in order to live well later — and not need the old-age pension, and so avoid being a drain of the taxpayer. But second, they don’t want us to live in a luxurious fashion when we do retire. To have been too successful in being provident attracts the grasping tentacles of the taxation system. ‘We didn’t mean that you should live this well!’ they are likely to say. But who is to say what ‘this well’ ought to be?
If you put in a question like ‘how much superannuation will I need?’ into ‘your favourite search engine’, as the ABC likes to say, you come out with some disquieting news. You don’t have enough to live comfortably. You need more. You should have started earlier, and so on. But a fairly well accepted figure is that a couple will need about $1m in super in order to live comfortably. What is ‘comfortably’? Well it doesn’t allow for extravagance, but does include some travel. Oh, it is understood that you already own your own home and are free of debt. You’re not? Hmmm. And, let us be upfront about this, the equations assume that you won’t live much past 85. You expect to live much longer than that? Well, you’ll need more money still.
All in all, superannuation is a problem, and Paul Keating started to do something about it when he was Treasurer. It was part of the fabled Accord that the Hawke Government signed with the unions back in the 1980s. The three variables in it that we need to be aware of are that (1) we are all living longer, and need more money for the extra years, (2) our standards of living have all risen, and to maintain them in retirement we need more money, and (3) there is no way that the old-age pension can cope with the majority of the community. Hence the Government’s concern that we plan for our retirement, and that everyone, not just salary-earners, should have a superannuation fund.
Now the Government’s proposals (which don’t seem to be part of any legislative program yet) start affecting people at the $2m super fund level, and apparently that’s about 16,000 people. So the rest of us can breathe the traditional sigh of relief. But while Tony Abbott has warned us that next time they’ll come for those lower down, I feel again that what is ‘comfortable’ to some might not be nearly comfortable enough for others. I have in mind couples, one of whom has a chronic disease, and people whose families are spread around the world, and people who already need serious nursing care, or expensive medicaments. And the older we get, the more expensive our health care becomes.
I recognise that there could be rorts in the current system. But it is a courageous government that fiddles with any scheme whose aim is to encourage thrift and financial prudence. Tony Crosland, a British Labour MP and Minister in the 1960s, wrote a book called Left Luggage, whose message concerned the way Labour voters felt let down in Britain when all the care and thrift they had shown was disregarded by their own Government, intent on providing social welfare to everybody. It’s a book that Messrs Swan and Shorten ought to read.