Australia’s superannuation pool has topped $4.5 trillion, and governments want a say in where it goes. When national priorities start competing with the duty trustees owe their members, something has to give.
Australia’s superannuation pool has passed $4.5 trillion. It is now larger than our entire share market, and it grows by billions of dollars every week through compulsory contributions that arrive whether members are paying attention or not.
A pool that size does not stay politically invisible for long, and superannuation policy is now squarely on the national agenda.
At a recent economic round table, the Prime Minister declared super a national asset, with scope to play a bigger role in housing, infrastructure and business development.
That framing is worth a very close read. The gap between an invitation and an instruction is the gap between your retirement and someone else’s priorities.
The duty that cannot be redirected
Let’s take a step back and remember that the legal duty of a super trustee is to act in the best financial interests of members. Not the national interest, not the housing shortage, not the government of the day.
Every dollar in the system represents a worker compelled to give up spending today in return for a better retirement tomorrow.
The moment a fund weighs a national priority against a member’s return, that duty comes under pressure. And once it bends, it is very hard to un-bend.
Two paths, one problem
There are two broad ways government could steer superannuation policy toward its priorities.
The first is a subsidy model. The Government makes a project attractive enough, through a capital guarantee, a return floor or tax credits. A trustee can then look at it on a risk-adjusted basis and fairly say it is the better option for members.
The member still gets the best outcome, and the taxpayer wears the cost of the sweetener. That version can work, because it keeps the trustee independent.
The second is a mandate model, where government simply requires that a set percentage of the pool flows into housing, infrastructure or business investment. That is where it gets ultra murky, because the member’s return is no longer the point of the exercise.
The problem no one is discussing
Decades ago, Australia moved from a defined benefit system, where the government or employer underwrote your retirement and controlled the capital. Today, under the defined contribution system, you carry the investment risk yourself.
If government wants to direct the capital, in the manner of the Future Fund, it should also carry the risk. Directing the money while leaving members holding the downside is the worst of both worlds.
When confidence becomes the casualty
Every time a government reaches into superannuation policy, confidence falls. The head of Westpac said it plainly: do not touch superannuation again, because you are already denting faith in the system.
When you force people to save and then tell them where the money must go, you feed the very distrust that has people muttering about putting it under the mattress. That erosion of confidence is a real cost, and no single project’s business case ever accounts for it.
A pool this large will always attract people who want to point it somewhere useful, and some of those ideas have merit. The test is the simplest one there is. Are they asking, or telling? The day your super stops working only for you is the day it stops being yours.
Source Article: The Golden Times (Drew Meredith – publisher of The Inside Network’s mastheads)