When is a super promise not a promise? Just before an election
The mistrust that Australians have for politicians was not improved by two events this week. The first was the ICAC report into Labor politicians in NSW, and the second was an announcement by the federal Treasurer on Wednesday relating to superannuation.
Chris Bowen promised that if the Rudd Labor government was re-elected there would be no changes to superannuation for five years. Bowen stated: "The five-year freeze, which commences immediately, means Australians can feel confident."
What he failed to mention was that this promise does not extend to previously announced superannuation reforms waiting to become legislation. Included in these reforms are the changing of how superannuation pensions will be counted by Centrelink, and the retrospective legislation taxing income over $100,000 earned by a super fund paying a pension.
At face value this last measure only appears to affect the rich end of town. However, in 10 years, $100,000 of income earned in a super fund, especially when large capital gains are made after investments are sold to fund a pension, could mean a lot more than just the wealthy will be taxed.
Given the superannuation changes made by the Rudd/Gillard governments, with many having either reduced benefits or increased taxes, the promise of the five-year freeze is a hollow one. It is like the alcoholic promising to go on the wagon after they have drunk the bar dry.
The announcement of the freeze resulted partially from a report Bowen received on July 5 from a superannuation think tank known as the Charter Group. This group was formed on April 5 when the Gillard government announced it was establishing a Council of Superannuation Custodians. Its purpose was to ensure that any future changes to superannuation were consistent with an agreed Charter of Superannuation Adequacy and Sustainability.
The Charter Group took submissions from interested parties and developed the framework for how the new council of custodians would work. The group was chaired by Jeremy Cooper and was made up of a retired judge of the Federal Court, the deputy chairman of the Australian Prudential Regulation Authority, and two representatives from the financial services sector.
If the Charter Group was meant to be looking at the adequacy and sustainability of superannuation, the question must be asked: why was the largest sector of the superannuation industry not represented on the group? This is not the first time the Labor Party has ignored self-managed super funds. Thankfully when this occurred previously a representative of the SMSF industry did get appointed to the Cooper review of superannuation.
One of the findings of the Charter Group was that because superannuation requires a lifelong commitment by Australians, people have to be given more certainty when it comes to policy matters affecting it.
Unfortunately, the Charter Group also gave equal weight to the importance of fairness when it comes to superannuation. This concept of fairness has two sides: one that opposes changes to superannuation that reduce superannuation benefits due to being unfair; the other effectively sanctioning changes to the super system when the system is viewed as inequitable and unfair.
In the final analysis this promise not to change superannuation for five years must be viewed in the context of what it really is - an election promise. The last time Labor made a similar promise in relation to making changes to superannuation was in the 2007 election.
Kevin Rudd, when asked about possible changes to super if he gained power, replied: "Not one jot, not one tittle."