The super sector has split over a long-term plan to move the super guarantee to 12 per cent, with some of the nation’s biggest retail funds backing away from a policy that could deliver hundreds of billions of dollars into the retirement savings system.
The move came as the ACTU fired a warning shot that it was prepared to fight any moves to delay next year’s increase in compulsory superannuation, threatening to turn the stoush into an industrial showdown.
“This is a critical issue,” ACTU president Michele O’Neil said at an ACTU-hosted online summit on Monday. “We are not going to allow the government to remove those increases which are scheduled and legislated and promised.
“For the Australian trade union movement, this is a fight that we are not giving up,” she said.
There are increasing signs that the Morrison government is seeking to back away from increasing the super guarantee from the current 9.5 per cent 12 per cent by July 2025.
The rise in the compulsory super guarantee, starting from an increase to 10 per cent from July next year, is already in legislation but could be reversed by an Act of parliament.
The retail superannuation sector is taking a softer line, reopening a long-term battle, with the retail-focused Financial Services Council pushing a recommendation from the Hayne royal commission that super fund members have a single “default” super account that is carried with them when they move from job to job.
A spokesman for AMP said the company had supported the push to 12 per cent in the past, before the emergence of the COVID-19 pandemic, but now wanted to await the outcome of the retirement incomes report currently being considered by the federal government.
IOOF chief executive Renato Mota has said that while he supports a move to 12 per cent it now has to be considered in light of the economic hardship caused by the pandemic. IOOF could emerge as the nation’s biggest retail fund with more than $170bn in funds under administration following its planned acquisition of MLC.
The Assistant Minister for Superannuation, Jane Hume, said in August that she was “ambivalent” about the increase.
Lower wages for many
Reserve Bank governor Philip Lowe also warned last month that an increase in the super guarantee would mean lower wages for many workers.
He said increasing super would have a “negative effect on wages growth” and make wages growth “even lower than it otherwise would be”.
With the industry looking for some comments on the government’s view on superannuation in next week’s budget, there are concerns among supporters of the super guarantee increase that the government will use the pandemic as well as the release of the retirement incomes report to further delay the increase.
In her comments on Monday, Ms O’Neil said that the move to increase the super guarantee to 12 per cent was the remaining policy change needed for the superannuation system.
“We will be campaigning to ensure that we finish the job of building an adequate, fair, equitable retirement savings system for every Australian,” she said.
“We will be continuing this campaign.”
The increase in the super guarantee has been delayed twice already by Coalition governments.
She said the issue of increasing superannuation should be “above politics.”
Ms O’Neil also told the forum that suggestion that wages would go up if there were no increase in the superannuation guarantee was a “myth”.
She said wage growth had remained relatively stagnant since the Abbott government six years ago announced it would delay the scheduled increase above 9.5 per cent until 2021.
But former ACTU secretary Bill Kelty, also speaking at the forum, said there was no guarantee that workers would get any wage increases at all next year.
He said workers had been asked to accept lower wages, work part-time, and run down their long service leave and annual leave during the pandemic.
If the super guarantee increase did not go ahead next year they would be denied an increase in their entitlements, he said.
“Ordinary workers are being asked to take annual leave, long service leave and work part-time,” he said.
“In reward for this they are being told that they won’t get their superannuation increases.”
He said there was no evidence that ordinary workers would be getting any wage increases next year as Australia was heading into one of its worst recessions in recent memory. “It is part of a set of cruel, unfair policies being imposed on a community if they take the superannuation increase off them on the pious hope that they may get a wage increase when there is no evidence they will get a wage increase.
“It would be terribly unfair to take the super increase from workers,” Mr Kelty said.
But support for the idea now seems to be split along industry and retail super lines.
Financial Services Council chief executive Sally Loane said the Council supported the superannuation contribution rate moving to 12 per cent.
But she said the FSC believed the royal commission’s “one default account” recommendation “should be prioritised to coincide with the increases in the contribution rate”.
She said consumers “had a right to expect the system to be efficient”. “We urge the government to prioritise this reform so that consumers know, if the contribution rate is to increase, then their savings will not be eroded by unnecessary fees from duplicate superannuation accounts.”
She said the Productivity Commission identified the system had 10 million “zombie” superannuation accounts generating $2.6bn in unnecessary fees every year.
“The ‘one default account’ recommendation would ensure an end to the scourge of account proliferation by stapling employees to one super fund, which they will take with them from job to job, as they do with bank accounts and tax file numbers.”
The industry is awaiting the release of the retirement income review, which has been presented to government but not yet released.
The review is expected to include an assessment of the viability of going ahead with the increase in the compulsory levy.
Speaking at the ACTU’s “emergency superannuation summit”, former Liberal Party leader John Hewson said the government should not use the current economic environment as an excuse to further delay the super guarantee increase.
“This is not a political issue, it’s not about political expediency or the COVID recovery,” he said. “It’s about longer term strategic challenges.”
Former AustralianSuper chair Heather Ridout implored the Morrison government to not “chip away” at superannuation.