‘You are never too old for super’ – our call to the Murray Review

Co-founder of the Switzer Report
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While we don’t pretend to represent SMSF trustees, we do think we can speak with some authority on how the sector is performing. With the Murray Review (the Financial Systems Inquiry) canvassing the important questions of ageing and superannuation, we thought it important to join the circa 250 banks, brokers, insurance companies, wealth managers and other parties making a submission.

Here is a quick synopsis. You can read the full submission here.

SMSFs are doing pretty well and keep the industry on their toes

SMSFs play a critical role in producing a competitive, innovative and vibrant superannuation market place. The data suggests that SMSFs have, on the whole, outperformed industry and retail funds. For many members, they are a more cost effective option.

We dispel some myths

We poured cold water on some of these “myths” about SMSFs:

  • There is a looming crisis developing with SMSFs borrowing to invest in property;
  • There has been a massive shift into cash/term deposits post the GFC;
  • SMSFs are just waiting to invest in infrastructure assets or corporate bonds;
  • There are compliance issues with SMSFs; and
  • SMSF members want a compensation scheme.

Let anyone make a contribution to super, abolish the employment tests

The current ‘employment tests’ around withdrawals or contributions to superannuation are complex, ineffective and easy to get around. We recommended that:

a) The conditions of release relating to superannuation withdrawals be simplified by removing all retirement and work-based tests, and replacing them with simple age-based tests; and

b) That all Australians, irrespective of age and subject to any contribution caps, be eligible to make contributions to superannuation.

Let’s make super more relevant to the young

To make superannuation more relevant and more attractive to some Australians, particularly the young, we suggested that a portion of superannuation savings be eligible to be used as a deposit for the person’s primary residence. We proposed a model of ‘the lesser of 33.3% of a person’s superannuation account, or 10% of the average home price’, with the withdrawal to be paid directly by the super fund to the vendor of the home.

Too much hype about a corporate bond market – where is the demand?

Contrary to all the hype (Ken Henry started this), we don’t think that you are “falling off your chair” to go and invest in corporate bonds or infrastructure assets. It takes two to tango – all the hype from The AFR and others comes from the “supply side” (issuers and government) – no one ever considers whether the demand is there.

And with fully franked dividends and companies like the Commonwealth Bank, why would you? Show me a corporate bond or infrastructure asset that has an income profile like CBA shares have had since 1991.

CBA Dividends

We suggested that if the Government is serious about the development of these markets, it will need to attach some form of taxation advantage to an investment in corporate bonds or infrastructure assets, plus commit to funding an extensive and ongoing investor education programme.

Your comments and feedback

We would welcome your feedback, ideas and comments. Tell us if you think we are wrong. There is bound to be a chance for a supplementary submission, so we would really appreciate any insights you can offer.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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