Prepare for change, super industry told Retirement Competing interests
Industry bodies have called for no changes to super for up to a decade and threatened an advertising campaign against potential adverse policies, but Mr Sherry said no government would quarantine the sector from reform.
"There will be constant change in the superannuation system," Mr Sherry, the former Labor assistant treasurer and minister for superannuation and corporate law, said.
"I think you've got to be a touch realistic. Everyone wants different things from the super system: there are lots of competing interests, there's lots of self-interest," he told a conference. "I don't think it matters who is in power, no government is going to say, 'We are going to put away superannuation and retirement funds policy and have no change for five to 10 years'."
Now a senior adviser at Citi and Ernst & Young, Mr Sherry also signalled a crackdown on lump-sum payments, matching the super access age with the pension age and trimming incentives for voluntary contributions as compulsory contribution levels rise.
"The last large area of reform that must be tackled . . . we have a lump sum superannuation system accessed at 60, we have a pension age of 65 increasing to 67 that is means-tested," Mr Sherry said.
"That is not sustainable. They'll have to put parameters around the lump sum and there'll have to be convergence between the access age and the age pension."
And he forecast continued debate on the sustainability and fairness of tax concessions for high-income earners, saying tax expenditures on super were increasing at a rate of 10 per cent a year.
After Treasury warned that the cost of tax concessions will jump to $45 billion by 2015-16, Labor announced minor changes to super rules in April.
"That issue will come back, rest assured, it's not going to go away," Mr Sherry said.
"It may not be dealt with in the first term of the new government but it'll certainly have to be dealt with in the second term. How it's dealt with, we'll see."
The super industry also recently criticised the Coalition for announcing plans to defer the increase in compulsory super contributions to 12 per cent by two years.
At the same CEDA conference, Michael Lorimer, chairman of the Small Independent Superannuation Funds Association, pointed to the political clout of Australia's self-managed super funds.
"Four hundred and eighty thousand [self-managed] funds translates into one million votes, so the political clout of this segment of the market is becoming more relevant," he said.
Frequently Asked Questions about this Article…
Yes — Nick Sherry, Australia’s first superannuation minister, warned that change is inevitable for the $1.6 trillion retirement savings sector. He said the system will see constant change because of competing interests and self‑interest in policy, and that no government will promise no changes for five to ten years.
Sherry signalled a potential crackdown on lump‑sum payments, moves to match the super access age with the age pension, and trimming incentives for voluntary contributions as compulsory contribution levels rise. He framed these as necessary reforms to improve sustainability and fairness.
Sherry said the current system — where lump sums can be accessed at about age 60 while the age pension is means‑tested and rising from 65 to 67 — is not sustainable. He suggested parameters will need to be put around lump sums and there will need to be convergence between the super access age and the age pension.
Yes — Sherry forecast ongoing debate about the sustainability and fairness of tax concessions for higher earners. The article noted tax expenditures on super were increasing around 10% a year and Treasury warned the cost of these concessions could jump to $45 billion by 2015–16.
The article reports that the super industry criticised the Coalition for announcing plans to defer the increase in compulsory contributions to 12% by two years. The timing and pace of compulsory contribution rises are politically contested.
Industry bodies have called for no changes to super for up to a decade and have even threatened an advertising campaign against potential adverse policies. That stance contrasts with Sherry’s view that reform is unavoidable.
Michael Lorimer, chairman of the Small Independent Superannuation Funds Association, said there are about 480,000 self‑managed funds, which he estimated translates into roughly one million votes — indicating growing political clout for this segment of the market.
Sherry suggested major issues — like tax concessions and structural reforms to lump sums and access ages — may not be dealt with in the first term of a new government but are likely to reappear and probably be addressed in a second term. He emphasised reform will be an ongoing discussion.
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