Watch out for the super gouger “savings” meme

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by Chris Becker

Uh Oh. Get your antennae up when the super-duper fund managers start using the “need to put more savings into super” meme to increase their ticket clipping activities.



The head of the country’s largest wealth manager has warned Australians will end up poorer and paying more tax to fund pensions if something isn’t done to boost superannuation savings.

AMP chief executive Craig Meller says a lack of savings will leave Australia with a fiscal challenge far more serious than the budget shortfall currently facing the Abbott government.

“We need to take action now to counter what is the most predictable threat to our prosperity over the next 20 to 30 years,” he said in a speech on Tuesday.

“And, the simple reality is that saving just 9.5 per cent of your earnings is not enough.”

“We only have four options: save more, tax more, work longer or be poorer.

Can I suggest a few more options Mr Meller?

How about reduce the major cost of living – financing a bloated mortgage – while increasing real wages and maybe, hey – just a thought – increase productivity so we don’t all have to work til 85.

Actually the “tax more” option can be implemented straight away by removing the flat 15% tax for high income earners in super. Given total concessions are around $30 billion a year, by adjusting this where the top 5% of earners pay their marginal tax rate would save about 20%, or around $6 billion a year. 

Further, as shown by The Murray Inquiry, where a simple 0.38% reduction in management fees from their current sky high bloated levels to a median international standards could automatically increase final balances by over $40,000. Currently the industry pulls in over $20 billion a year in fees, or around $2000 per Australian with a super account.

I would add that its not just about the quantity of savings, but where and how those monies are applied. The vast majority of “savings” are leveraged into property, or into buying shares in property lenders (i.e Megabank – the big four banks take up most of your default asset allocation) or sit in cash deposits – which, yep you guessed it – help finance more property.

Look, I’m super critical (sic) of the super funds industry which has one of the most easiest jobs in the Western world – and I used to be part of it – and one of the most ineffiecent and anti-capitalist in nature.

And it seems easy to say, especially when it comes from a firebrand like former PM Paul Keating that we need to increase savings from x to y.

The Henry Tax Review was explicit about who pays for these savings:

Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth. This means the increase in the employee’s retirement income is achieved by reducing their standard of living before retirement.


If Mr Meller and others within the superannuation industry are asking for everyone to sacrifice their standard of living now as the unwinding of the mining boom just begins to accelerate while not making any other concessions (e.g fees) then watch out for the pitchforks.

And to finish on no surprise on the “leave us alone” regulatory front:

Mr Meller also rejected calls for greater regulation of the financial advice industry, which has sprung up in the wake of the scandal surrounding Commonwealth Bank’s financial planning division.

A Senate report in June blasted the bank over misconduct and fraud and chief executive Ian Narev apologised to customers who lost money after financial advisers forged client signatures to facilitate profit-producing product switches and switched investments without clients’ consent.

“Like any profession, we need to prove we can regulate ourselves effectively,” Mr Meller said. “And I believe we can.”

Of all industries on the planet that need closer scrutiny, the FIRE sector should have the most powerful microscopes – and big sticks – pointed at it. And it needs to be top down regulation, not just tick and flick checks or the limp wristed ASIC/FIRB/APRA apparatus.



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  1. ceteris paribus

    This guy is the apotheosis of self interest. He want more into super- more management fees for AMP and a prohibition of large lump sum withdrawals- longer management and more fees for AMP.

    Why doesn’t he just say feel free to send in donations.

    • No point having a negatively geared IP without a taxable income either.

      Once the host is dead what is the life expectancy of the parasite?


    • “Westpac said the WA and Queensland workers had done an excellent job, and the closures were no reflection on their performance.
      The spokesman said the leases at both centres were due to expire.”

      – this should add nicely to the huge glut of empty office space in Perth CBD/West Perth

  2. And if the super gets wiped out, we can always use our American friends expertise in building tent cities.


    Good work CB!

    Seems to me some real savings could be enjoyed by investors if the MER’s (mgmt expense ratios) were put under the spotlight.

    Currently, my $12,000 (hypothetical) in fund X pays about 1% or $120 per year for the expertise of manager and team.

    My Aunt Bette also has the fund but due to the sale of her Balmain PR, now has $750k in the fund and ‘pays’ $7500- a cylindrical, vertical pricing model.

    The platforms offer ‘break points’ on volume like other business to reward, not penalize the customer. Why not here?

  4. You might also note that superannuation failed to achieve its ostensible objective: increasing savings for retirement.

    Look here for LvO’s November 2013 article on Australia’s savings rates.

    After the introduction of voluntary superannuation in the late 1980s, and compulsory superannuation from 1991 onward, there is no evidence at all of its changing the steady downward slope of household savings.

    And look here (9th chart: household debt to GDP) to see how household debt began to skyrocket in 1991 . . . just as compulsory superannuation was introduced. (There is a smaller upward blip a couple of years earlier, coincidentally or otherwise just when voluntary superannuation was introduced.)

    It wasn’t until the horror of the GFC that savings rates began to rise sharply. Nothing to do with superannuation.

    Why did this happen? Apparently Australians simply substituted superannuation for traditional forms of saving, principally buying a house an paying it off. With the rise of compulsory superannuation, the banks moved in to offer “home equity loans” to allow wage and salary earners to maintain their spending in the face of the “compulsory saving”.

    That effect will be worsened by allowing superannuation to be applied to buying the place of residence. It will be worsened by forcing superannuation funds to “invest” in private infrastructure projects (a compulsion which will quickly degenerate into a hidden tax as funds find themselves obliged to “invest” whatever the rate they are being offered).

    This is a cautionary tale for those who argue in favour of raising superannuation contribution rates and prohibiting people from withdrawing “their” money as a lump sum.

    Attempts to raise savings rates by compulsion have failed in the past and there is no reason to believe they will succeed in the future.

    All they are guaranteed to do is line the pockets of the ticket-clipping rent-seekers who run the OECD’s third most expensive pension scheme.

    • Ronin8317MEMBER

      There is one additional objective which superannuation have failed : removing the obligation from government to pay a pension. Thanks to the ability to withdraw your money as a lump sum, it encourages retirees to spent every cent and/or put money under the mattress, then go on the full pension.

    • Surely we will not know how successful super has been till mid century when the first cohort of ’90 school leavers who entered the workforce, and will be planning to retire….

      Understand issues of funds management, especially if you have no choice, but what alternative did Labor have in the 1980s? Watch a baby boomer retirement + ageing oldies vs state resources car crash happen?

      As it stands, any super shortfalls can be made up with supplementary old age pension, to ensure minimum income, which maybe more than in the past?

      Australia still has a mighty fine and sustainable social security system compared with much of the world, and I still do not understand that while many have a mortgage, they view super as burden?

      Australians need a reality check, many countries in Europe, at least for their younger generations now and in future, have no social security net as resources are being used to prop up the pension system now, as politicians are beholden to older generations of committed voters……..

  5. You have to get that into the MSM CB. It’s brief, it’s digestible and best of all it’s brutally correct. Australians just do not understand how badly they are being screwed by super and the ticket clipping machine. I raise this stuff from time to time, and most people are off with the fairies on super, they have just been so cripplingly brainwashed.

    And as you point out, there is nothing more capable of bringing blood to the boil than politicians telling us we need to save more for retirement (at the expense of our living standards), while running one of the most expensive housing rackets in the world which dwarfs any pissant saving plan.

  6. Fine. Just cap the fund fees at 0.10%. Vanguard seems to do just fine in the US with that rate.

  7. Being a simple Simon re how money really works (but better than most politicians etc), here is a question.

    Does not the never ending supply of money that is being forced into super just push up the share price of what ever ‘They’ the super fund managers are buying? and in fact do little to improve the return on those long term super savings?
    A bit like much of today whereby much money has been magic’ed into our economy and everything is inflated with little return on it, that is, all current investments.
    And does that then put our super funds into the category of being speculative rather than real investment grade? leaving our future security in line with for eg, house price growth?

    • The answer is ‘Yes’

      We have created a huge supply of money through debt, and all of that money is chasing yield.

      Demand for new borrowing is very low so interest rates are pushed down to zero and asset prices are jacked up higher. I think that you have probably already worked all of that out.

      The questions are:-

      1. Is all of that money going to be used to repay debts and thus get rid of the excess money in the system.


      2. Will we see an increase in demand for new debt thus restoring the equilibrium between the supply and demand for money.

      And when you have worked out that, how will it affect future asset prices – think property and shares.

      Which do you expect Steve – answer 1 or 2 ?????

      • I have no idea, all I can see is a broken model whereby there is endless calls for us to put more money into something that is reducing its own utility, ie the more we put in, the smaller the ultimate % return, hence the spruikers for the system are doing little other than demanding a bigger clip for their own nest which wont in fact, put us as individuals in a better position when we retire.

    • It’s even worse than that.

      When the private infrastructure business started to take off in Australia in the late 1980s (at about the same time the new superannuation system was coming into being), one of the first things the spruikers began campaigning for was the creation of a new ASX “category” covering infrastructure.

      The reason? Trustees are loathe to let their funds asset allocations deviate too far from the market allocation categories. Creating a new category almost forces the trustees to direct a market average (or near-average) proportion of their assets into that category.

      Recently there has been a move to make this compulsory for infrastructure. (This is actually a return to the old “30/20 Rule” which operated until 1985 and which required complying funds to invest 30% of their funds in government and semi-government bonds, of which 20% had to be in Commonwealth bonds.)

      These moves taken together are creating a “private government” which effectively “taxes” wage and salary earners (privately wealthy people are exempt) and forces them to “invest” in public works.

      The only difference between this and traditional taxation is that the Sydney finance industry ticket-clippers take their cut at every turn.

      That is why the Sydney/Canberra government will do nothing to stop it.

      God help Australia!

    • Absolutely steve. And remember, every country has its own version of liquidity excess at the moment – all chasing yield.