Mannkal Economic Education Foundation


Superannuation – for better or worse?

Ron Manners

5 January 2017

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So we have come to the end of the annual round of changes to our Super Fund, which in Australia, started off as a world model for the superannuation system.

Instead we have had this annual tampering and numerous amendments (mostly via media announcements). Some amendments are to correct earlier legislation.

Although it is ‘your’ superannuation and originally designed to get you off the promised ‘government pension’, the money for this promised pension is simply not there; because the taxes you paid have since been pre-spent by our governments, mainly on themselves, including their own over-generous Super Funds.

So, what exactly is it that drives this annual frenzy of changes?

Why not leave a reasonable system alone for a few years, so that it can meet the objective of giving us independence through our own financial responsibility?

There is a reason, and it is explained in economic terms by what is called Public Choice Theory, with the recipients of the concentrated benefits (money), being the accounting profession and financial advisers working their butts off to generate constant change, whereas the diffused costs are spread over the millions of people, such as ourselves, being the owners of our superannuation policies.

Most of the latter group are too busy following the latest rule changes and paying the professionals to handle such matters for us, hence we are too busy to march in the streets and demand that they ‘leave our superannuation alone’.

Sally Patten (Australian Financial Review, Nov. 28, 2016) put this well under the headline:-

“Thank you, Treasurer, for the super reforms”

Portion of her article ….

“On behalf of the financial planning and accounting communities, your correspondent would like to take this opportunity to thank Treasure Scott Morrison for the most significant superannuation reform package in nearly a decade.

Changes to the retirement savings rules, especially complicated, tectonic plate-shifting ones such as those which will be introduced on July 1 next year, help to justify the existence of a variety of occupations, including government relations and policy experts, lawyers, super fund administrators and a good number of staff at the Tax Office (not to mention financial journalists).

But the biggest beneficiaries will surely be financial advisers and accountants, who will spend the next seven months demonstrating their expertise by explaining the changes to their clients and ensuring that they remain on the right side of the law. ……..”


2 Responses to “Superannuation – for better or worse?”

  1. Bob Beatty says:

    It has been interesting reading all the suggested “fixes” to the superannuation mess. Our approach has been to put all our investments in our joint married names and pay tax as it accrues, or carry forward the losses to next year if their is no profit. The point being that as a couple we are far better off without a super account at all. Our advice to the government is to abandon the super industry alltogether, return the existing assets to their individual owners, and let the populous look after their own assets. The principle to recognise here is “if you put your hand into the government’s maw, don’t be surprised if you have some fingers missing when you take it out.” Always remember, nobody is going to look after your assets better than you can.

  2. Philip Kirchlechner says:

    Dear Ron,

    Thank you for your valid comments on this issue. The government’s super changes will do nothing for “budget repair” but is going to damage confidence in the system. Why should someone lock up their money for many decades if even a government led by the Liberal Party can make drastic and inexplicable changes? Labor at least guaranteed $75,000 per person of income tax free in their previously announced policy. The new policy at current interest rates of about 1% will give you $16,000. Furthermore, the new policy does not address the issue of super splitting. Therefore, unless two spouses have independently built their own super, a couple will only have access to the one $16,000 tax free. That is why Labor agreed so readily to the changes. Amazing to have a liberal PM more left-wing than Labor. Of course the decision makers in Parliament will receive tax-funded pensions that it would take at least $10 million in a self-managed superfund to replicate. Perhaps here should be the focus for budget repair.