One by one, the chief rent seekers behind Australia’s compulsory superannuation rort have attacked the notion of freezing the superannuation guarantee at 9.5%.
The latest salvo comes from Martin Fahy – CEO of the Association of Superannuation Funds of Australia (ASFA) – who has likened those seeking to freeze the superannuation guarantee to being whacko “anti-vaxxers”:
The head of Australia’s peak superannuation body has warned the Government not to mess with the superannuation system.
“If you start dismantling superannuation, you’re essentially an anti-vaxxer,” Martin Fahy told 7.30.
“You’re pulling the system apart and leaving individuals exposed and losing the herd effect.”
The Federal Government has announced a review into superannuation and some of its MPs have called for a delay, or entire scrapping, of the legislated increase to the compulsory super guarantee to 12 per cent.
“The irony of this is, this is coming from politicians who get 15 to 16 per cent contributions themselves,” Dr Fahy said.
“We need to commit to going to 12 per cent.
“We need that herd effect so we can keep the age pension for those that need it.
“The group and pooling effects … the scale of superannuation is ultimately what protects us all.”
There are so many stupid statements here, it’s hard to know where to start.
First, regarding Fahy’s claim that compulsory superannuation provides “group and pooling effects” and “scale” that “ultimately what protects us all”, how does he explain why Australia has some of the highest management fees in the world despite having among the largest funds under management?
And why have costs increased?
Shouldn’t this “pooling effect” and “scale” have caused fees and costs to have fallen?
The answer is obvious: compulsory superannuation has created a ‘sheltered workshop’ for funds, and they have become both inefficient and are gouging members.
Second, why has Fahy ignored the various expert assessments showing that compulsory superannuation is both robbing workers of disposable income and costs the federal budget more than it saves in Aged Pension costs?
Specifically, the Henry Tax Review recommended against raising the superannuation guarantee, since it would lower take home pay and have a particularly detrimental impact on lower-income earners:
“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…
The retirement income report recommended that the superannuation guarantee rate remain at 9 per cent. In coming to this recommendation the Review took into the account the effect that the superannuation guarantee has on the pre-retirement income of low-income earners”.
The Henry Tax Review also warned that the budgetary costs of compulsory superannuation actually exceeds savings to the federal budget:
“An increase in the superannuation guarantee would … have a net cost to government revenue even over the long term (that is, the loss of income tax revenue would not be replaced fully by an increase in superannuation tax collections or a reduction in Age Pension costs).”
The Grattan Institute has come to similar conclusions:
Even slower wage growth will be the result of increasing compulsory superannuation contributions from 9.5 per cent to 12 per cent…
If compulsory super contributions go up, wages will be lower than they otherwise. And the cut to wages from raising compulsory super is big. Really big. By the time it’s fully implemented in 2025-26, a 12 per cent Super Guarantee will strip up to $20 billion from workers’ wages each year, or nearly 1 per cent of GDP…
[Moreover] both the short and long term, superannuation tax breaks cost the budget more than they save in pension payments:
Is Fahy seriously suggesting that the Henry Tax Review and the Grattan Institute are “anti-vaxxer” loons?
Martin Fahy is clearly talking his own book here. He wants the superannuation guarantee lifted since that means more funds under management and the ability to ‘clip the ticket’ with more fees. Workers and the federal budget be damned!