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Issue #1889      October 9, 2019

Josh and the finance sector raiders

Attack on workers’ super

Hot on the heels of a Productivity Commission (PC) Inquiry into the efficiency and competitiveness of superannuation, the government has now announced a review of retirement incomes. This review will look at superannuation, the age pension and private (voluntary) savings including the family home, aged-care funding and franking credits. It is to examine the “facts”, not to make recommendations.

Treasurer Josh Frydenberg and the finance sector are on the offensive, with the aim of destroying industry super funds, privatising the sector, and removing as many people as possible off the age pension. This latest review will be another step in the preparations for the next round of changes to age pensions and superannuation.

At stake is the management of $1.9 trillion in superannuation savings with the billions of dollars in tax rorts for wealthy untouched.

The inquiry will be led by a former Treasury official Michael Callaghan alongside Carolyn Kay, a member of the Future Fund, and Deborah Ralston, chair of the Self Managed Super Fund Association.

Ralston has previously raised the question of whether superannuation contributions should be compulsory for those on low incomes. She also led the Alliance campaigning against Labor’s franking credits policy during the elections. Her appointment is highly controversial. There is no one representing members of industry funds.

Under the original superannuation contribution schedule introduced by Labor, the compulsory employer contribution should have reached 12 percent by 2019. But the Abbott government, after two small increases in 2013 and 2014, froze the rate at 9.5 percent, using legislation. The legislation also provides for annual increases of 0.5 percent from July 1, 2021 until it reaches 12 percent in 2025.

The PC report, publicly released in January this year, recommended a number of measures to rule out the specification of particular funds in industrial awards for workers, based on an industry or occupation, and turns retail funds into default funds for new members.

The PC’s recommendation that this latest inquiry be held before the next increase in the compulsory superannuation guarantee (CSG) is due, suggests that it expects that the increase will either not go ahead or will be reduced/delayed.

None-the-less, the government says it has no plans to further delay the legislated increases to the CSG rate. It also says it will not increase the pension age or include the family home in the pension assets test.

The CSG has always been a target of the Coalition and the employers as have the industry funds that are governed by boards with equal representation of employer and trade union reps and an independent chair. These funds, since their establishment in the 1980s and early 1990s, have always outperformed the private funds run by the finance sector, known as retail funds.

Judging by the terms of reference and composition of the “independent” panel, workers have a great deal to be concerned about. The government has continuously rolled back eligibility for the age pension that is hardly enough to live a life with dignity.

Possible recommendations coming from this review include:

  • Tougher eligibility requirements and cuts to the pension itself, especially for people who own their own homes or have any savings
  • Forcing pensioners to draw on the assets in their family home by such means as negative mortgages
  • Abolishing the compulsory nature of the scheme, in particular for low income workers
  • The cashless card is looming high on the agenda, with age pensioners in line.

In 2016-17 the average savings for males in pension funds was $146,420 and for females it was $114,350. Such amounts are nowhere near enough to provide a constant stream of income in retirement.

Many self-funded retirees have been hit hard by low interest rates. They might be “asset rich but income poor” and so fail the assets test. There are also retirees with savings where the government deems them to be receiving a much higher interest rate than they are. This affects the tax they pay and also the income test.

There are many problems and contradictions within the existing system and the interaction of the various rules affecting the age pension, super, aged care and savings. Privatisation and lack of universality of the age pension contribute to this situation.

Going back to the Whitlam government, the aim was for a universal national scheme with a uniform rate of payments, funded by workers according to the income. Unfortunately this never materialised as a coup in 1975 saw the defeat of his government.

When the CSG scheme was introduced it had a number of aims:

  • Enable the centrally funded, public age pension to be wound back and eventually abolished with super providing retirement income
  • Create a large pool of investment capital for the finance sector to manage and so increase its power and profits
  • To meet an ideological agenda based on the neo-liberal concepts of “self-provision”, “small government”, and privatisation
  • Kill off the concept that the age pension as a right.

The Communist Party of Australia believes all Australians have a right to retire with dignity with adequate income as well as services to meet their needs for a comfortable lifestyle regardless of their previous work history. For women and disadvantage people, in particular, this right is paramount.

This necessitates a universal age pension which is centrally funded by the government.

The CPA also proposes that a national superannuation fund be established that workers may contribute to on a voluntary basis. This would be publicly run on a democratic basis without hefty, hidden fees and provide a source of additional income for those who wish it.

The Review is set to report by June 2020.

Next article – Editorial – Handing over to the corporation

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