Economist proposes controversial change to superannuation: ‘It’s a really ugly mark’
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As we navigate the ever-evolving landscape of retirement planning, a new debate has emerged that could potentially reshape the future of Australia's superannuation system.
The topic of superannuation is always a hot one, especially for those who are looking towards retirement or are already enjoying their golden years.
But what if the system as we know it was on the brink of a radical transformation?
An independent economist, Cameron Murray of Fresh Economic Thinking, has sparked a conversation that's causing quite a stir among retirees and those nearing retirement.
Murray has proposed a bold move: abolishing compulsory superannuation and returning the funds to Australians to manage themselves.
This suggestion comes with a critical look at the current system, which he claims is riddled with high administrative costs and fees, amounting to a staggering $30 billion to $40 billion a year.
'It's become quite a gravy train, and there are $30billion or $40billion reasons a year to keep the show on the road,’ he said.
'There's plenty of middle management positions, with titles such as "director of modernisation" or whatever the current trend is.’
He goes as far as to label fund managers as 'spreadsheet monkeys’, saying, ‘You get a little team and you sit there and bore your mates get some nice Powerpoints to reassure everyone the fund is being nice. It's ridiculous.’
The economist's critique extends to the origins of compulsory superannuation, introduced in 1992 by the Keating Labor government.
Murray highlighted a perceived contradiction in the Labor party's stance, which on one hand, privatises retirement savings, while on the other, claims to secure extra benefits for workers from employers.
'It's a really ugly mark on the Labor party, they have a two-faced view here,' Murray said.
'When it suits them for the base, they go, "We're winning for you, we're getting extra out of the nasty employers, super is something extra".’
'Whereas to the treasury and policy nerds, they say this is just diverting wages from bank account A to bank account B where a fund manager gets to do what they want with it until the contributor are 60 or whatever the age it is.'
Murray also revisited the original intent behind superannuation, which was to defer spending and control inflation by deferring wage increases into non-spendable accounts.
He suggests that this approach is outdated and that freeing up the money tied in super could stimulate economic growth and support a more robust and accessible retirement pension system.
The economist's views are not without their supporters. He nods to the Coalition's proposal allowing individuals to withdraw up to $50,000 of their super (up to 40 per cent of their balance) to purchase their first home.
‘A house is the best asset to own in retirement,' he said.
'In Singapore, with their compulsory savings system, their first objective is to own a house outright.’
'In Australia, you are not allowed to use super to buy a property for yourself when you are young and need a house, but you can buy property for someone else with a self-managed fund.'
However, he also pointed out the inequities in the system, such as the different ages for accessing super and the age pension.
'I think it is ridiculous you can get your super at 60 and the pension at 67,' he said.
'You've got rich people having seven years to spend their tax-advantaged savings before they can claim the government pension.
'It's a total boomer middle-class scam. You should have the same ages at a minimum.'
Murray's solution? A phased withdrawal of super funds, with annual spending limits to prevent a sudden spending spree that could destabilise the economy.
'You can't just let everyone spend all the money at once,' he said.
'There would be this huge spending spree because everyone under 30 would spend $50,000 extra this year.’
'You need to have an annual spending limit to empty the accounts over a four to five-year period for people who want to empty them.'
He also mentioned that there could be random spot checks to confirm companies are including super in salary payments.
How do you feel about the potential changes to superannuation? Are you in favour of managing your own retirement funds, or do you trust the current system to work in your best interest? Share them with us in the comments below!
The topic of superannuation is always a hot one, especially for those who are looking towards retirement or are already enjoying their golden years.
But what if the system as we know it was on the brink of a radical transformation?
An independent economist, Cameron Murray of Fresh Economic Thinking, has sparked a conversation that's causing quite a stir among retirees and those nearing retirement.
Murray has proposed a bold move: abolishing compulsory superannuation and returning the funds to Australians to manage themselves.
Economist Cameron Murray has suggested a controversial plan for superannuation. Credit: Shutterstock
This suggestion comes with a critical look at the current system, which he claims is riddled with high administrative costs and fees, amounting to a staggering $30 billion to $40 billion a year.
'It's become quite a gravy train, and there are $30billion or $40billion reasons a year to keep the show on the road,’ he said.
'There's plenty of middle management positions, with titles such as "director of modernisation" or whatever the current trend is.’
He goes as far as to label fund managers as 'spreadsheet monkeys’, saying, ‘You get a little team and you sit there and bore your mates get some nice Powerpoints to reassure everyone the fund is being nice. It's ridiculous.’
The economist's critique extends to the origins of compulsory superannuation, introduced in 1992 by the Keating Labor government.
Murray highlighted a perceived contradiction in the Labor party's stance, which on one hand, privatises retirement savings, while on the other, claims to secure extra benefits for workers from employers.
'It's a really ugly mark on the Labor party, they have a two-faced view here,' Murray said.
'When it suits them for the base, they go, "We're winning for you, we're getting extra out of the nasty employers, super is something extra".’
'Whereas to the treasury and policy nerds, they say this is just diverting wages from bank account A to bank account B where a fund manager gets to do what they want with it until the contributor are 60 or whatever the age it is.'
Murray also revisited the original intent behind superannuation, which was to defer spending and control inflation by deferring wage increases into non-spendable accounts.
He suggests that this approach is outdated and that freeing up the money tied in super could stimulate economic growth and support a more robust and accessible retirement pension system.
The economist's views are not without their supporters. He nods to the Coalition's proposal allowing individuals to withdraw up to $50,000 of their super (up to 40 per cent of their balance) to purchase their first home.
‘A house is the best asset to own in retirement,' he said.
'In Singapore, with their compulsory savings system, their first objective is to own a house outright.’
'In Australia, you are not allowed to use super to buy a property for yourself when you are young and need a house, but you can buy property for someone else with a self-managed fund.'
However, he also pointed out the inequities in the system, such as the different ages for accessing super and the age pension.
'I think it is ridiculous you can get your super at 60 and the pension at 67,' he said.
'You've got rich people having seven years to spend their tax-advantaged savings before they can claim the government pension.
'It's a total boomer middle-class scam. You should have the same ages at a minimum.'
Murray's solution? A phased withdrawal of super funds, with annual spending limits to prevent a sudden spending spree that could destabilise the economy.
'You can't just let everyone spend all the money at once,' he said.
'There would be this huge spending spree because everyone under 30 would spend $50,000 extra this year.’
'You need to have an annual spending limit to empty the accounts over a four to five-year period for people who want to empty them.'
He also mentioned that there could be random spot checks to confirm companies are including super in salary payments.
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