Self-managed super funds (SMSFs) are the “pioneer group” for the retirement income system that can provide invaluable evidence for the Retirement Income Review, says SMSF Association CEO John Maroney.
Commenting on the Association’s submission to the Review, Maroney says: “Considering SMSFs comprise over a quarter of the entire superannuation system’s assets of nearly $3 trillion, a significant portion of retirement income payments and are an appropriate and legitimate structure for many Australians in the retirement income system, they have a critical role to play in the Review. [About 1.1 million Australians have nearly 600,000 SMSFs of which 42% are in some form of retirement.]
“A significant portion of SMSF members have transitioned through accumulation and are now navigating their retirement. They are responsible for almost half the income benefit payments in the superannuation system, and almost half of all the voluntary contributions in the superannuation sector.
“Their widespread use, effectiveness and uniqueness to the retirement income system should not be underestimated when assessing the retirement income system and the positive retirement outcomes that have resulted for SMSF members.
“In our view, the superannuation system has been too focussed on the accumulation phase and this Review provides a welcome opportunity to increase attention on the retirement phase. Cohort analysis on the SMSF sector will help derive information and improvements for the broader retirement income system and those individuals who have yet to start retirement.”
Maroney says another key focus of the Review should be the integration of the different elements of the retirement income system.
“Ensuring that all parts of the retirement income system are working together harmoniously is essential for the system to deliver a secure and dignified retirement for as many Australians as possible. Current issues have resulted in a lack of engagement from Australians and a lack of incentives to appropriately save for retirement.”
The Association argues that an important outcome of the Review is to establish a set of facts on which sound, long-term policy can be built. “Too often, superannuation and retirement income debates are repeatedly conducted on the same issues without resolution. This continued debate, for example on the level of the Superannuation Guarantee, has stifled informed policy making.”
The Review should also address the complexity of the superannuation system, suggest a meaningful objective for the retirement income system and encourage governments to remove superannuation policy from the annual budget policy cycle to promote stability, competition and efficiency. “This complexity means most Australians do not have a good understanding of the rules that govern their superannuation.
“Dealing with regulatory change and uncertainty is commonly cited as the number one area of concern for SMSF trustees and advisers. The Association believes that a successful retirement income system requires superannuation to be simplified.”
The Review provides an opportunity to finally give the retirement income system an objective – a recommendation of the 2014 Financial System Inquiry.
“It is essential that the objective not only has a focus on providing retirement income but also ensures that retirees are able to build adequate retirement savings through the superannuation system to manage the financial risks of ageing and retirement.”
To view the SMSF Association’s submission to the Retirement Income Review, click here.