The rise and rise of Pauline Hanson continues and her super policy proposals to let pressured Australians access some of their super are scaring Labor and the Coalition into opposing her ideas for different reasons. As a financial planner, I can see Hanson’s super plan as useful and supportable under regulated conditions. And there’s no evidence that what’s on the table would kill super, as Treasurer Jim Chalmers is telling everyone.
Before I try to separate the lies from Hanson’s enemies and the likely consequences of letting Australians with real hip pocket issues access some of their super, let me outline my position on our super system.
First, it’s arguably one of the best in the world. Second, even though the industry super funds are majorly influenced by the union movement and Labor is a great protector of these funds, they have been terrific performers. And they made exploitative financial institutions that ran the super system, along with their advisers, play fair with super savers’ money.
Third, the 12% that employees hand over to their super funds on pay day is excessive and makes life harder for young couples trying to meet family expenses. Sure, it will provide for a great retirement, but people live most of their lives not on super but in the real world of employment, in debt, which actually undermines someone’s future wealth, while building up the balance sheets of banks.
So, now, let’s look at what Hanson proposes and see if it’s a killer blow to super. Here goes:
- She denies she wants to shut down super and if she did people like me would call her reckless, and as it is an asset that could grow to be more valuable than someone’s home by retirement age, you’d never want to see super killed off.
- Her plan will allow workers to access up to a quarter of their future funds over three years to help with the cost-of-living crisis. So, existing super wouldn’t be accessible, but if someone was on $100,000 a year and $12,000 went into super (that’s 12%) then up to $3,000 would be available to pay rent or mortgage repayments.
- This would be available for three years, which would potentially reduce someone’s super but it doesn’t have to, if later in life as income improves, the super member increases his or her contributions.
- It wouldn’t be for everyone but you’d have to prove that the impact of rising interest rates or rents is putting someone into dire economic circumstances.
- Would it be inflationary? Yes, if the system is hopelessly regulated, but it would have a minimal inflationary effect if regulated properly.
- People who access these funds would retire with less but if they keep a house, a marriage or a family together, then it could be worth it.
The Daily Telegraph reported on the potential loss for a super saver who might access Hanson’s plan. “The big super funds were not impressed by the plan, sharing modelling which claimed a median full-time worker withdrawing 3 per cent of contributions for three years would be $25,000 poorer by retirement,” it revealed. “A couple would be more than $50,000 worse off, the funds claim.”
These calculations are based on assumptions of an average Aussie and are pretty well right, but if Hanson’s super relief plan takes away the material impacts on rising interest rates and rents, to relieve young Australians, in particular, of mortgage or rent stress, then this policy option looks supportable.
Liberal leader Angus Taylor showed why his popularity continues to wane by offering bipartisan support for the current super scheme. The Tele reports that he thinks there are “a lot of questions that haven’t been answered” with the plan.
He asked sensible questions about the impact of these changes on things like super tax concessions, paid parental leave, concessional caps and other fine print details. However, this is why Angus can’t win over a majority of voters. He doesn’t know the people he has to win over.
And many of these Australians will think Hanson is onto something, and she is.
I also have to ask, did he forget that the Coalition had a past policy to allow first homebuyers to withdraw up to $50,000 of their super to get onto the property ladder.
Also, if you retire with a house and super, you’re generally better off than others with one or the other. And nowadays if a couple owns a house in retirement, they can downsize into a cheaper home and put $300,000 each into super.
That’s why if Hanson’s plan helps people keep their homes, later in life they could play catch up by either contributing more in their 50s or by downsizing.
When it comes to super funds complaining about losing money from members, it makes me recall Paul Keating’s observation: “In a two-horse race, always back self-interest because at least you know it’s trying.”
A balanced view says reports of super’s imminent death at the hands of Pauline Hanson and One Nation are greatly exaggerated.
