Recent comments from Angus Taylor have sparked concern that the Opposition may be secretly planning to scrap compulsory super and move to a non-compulsory American style ‘401(k)’ model. But have the Shadow Treasurer’s words been taken out of context?
Despite repeated denials over the years, it seems the question of whether the Coalition supports Australia’s voluntary superannuation system has reared its head once again.
In a recent economics lecture given at the University of Sydney, Shadow Treasurer Angus Taylor listed the steps he believes Australia needs to make if we’re to get out of the current housing crisis and get home ownership levels back up.
He said high levels of home ownership were the backbone of the economy and the continuing downward trend had far-reaching implications.
“A collapse in home ownership has profound implications not just for our aspirational character, but the costs of our retirement system,” he said.
“The challenge is complex and there is no silver bullet.”
Mr Taylor suggested measures to boost the housing construction rate and to put downward pressure on interest rates, making it easier for Australians to hold on to their homes.
But it was one suggestion about super that caused controversy, and perhaps gave an insight into what the Opposition’s economic plan might be.
“The Coalition has started by aligning superannuation with other global retirement schemes – like 401(k) – that allow withdrawals for the purpose of purchasing a first home,” he said.
The Coalition have already indicated they will be taking a policy to the next election that allows people to withdraw up to $50,000 from their super in order to buy their first home.
But this was the first time a senior Opposition minister had mentioned a shift towards the American system by name.
What is a 401(k)?
Named after a section of the US Internal Revenue Code, a 401(k) is a retirement account that works in a similar manner to superannuation – but with some very key differences.
First is that 401(k) accounts are not compulsory, and employers are not required to offer one to all or any of their workers. Instead, they are offered on a voluntary basis, usually as part of a position’s benefits package.
Rather than the funds then being managed by a third party like a superannuation fund is, 401(k) accounts are usually managed by the employers themselves. Unfortunately, this has led to incidents of the funds being misused for corporate purposes by some employers.
401(k) accounts are often plagued with high fees and low returns when compared with superannuation accounts.
Under Australia’s system, all employers are required to pay super contributions above their employees’ wages, managed by a third-party and preserved until retirement.
Comments cause for concern?
Critics were quick to pounce on Mr Taylor’s remarks. Joseph Mitchell, assistant secretary of the Australian Council of Trade Unions (ACTU) said the comments “should send shivers down the spines of Aussies.”
“Australia’s superannuation system is the envy of the world, with strong returns, robust governance, and providing enormous security for working people,” he said.
“The Liberals froze workers’ super when they had the chance, are planning to force workers to raid their retirement savings just to get into the housing market, and just this week floated that women should have to raid their super to deal with the costs of domestic violence or divorce.
“This is a clear sign that workers’ super and their retirement are not safe under Peter Dutton.”
But others were not so alarmed, pointing out that Mr Taylor was only talking about allowing withdrawals for home purchases – something permitted under 401(k) rules – not mimicking the system entirely.
Mary Delahunty, CEO of the Association of Super Funds of Australia (AFSA) told Investor Daily the comments had been clearly taken out of context.
“The full sentence makes it clear that that reference to the substandard American system is drawing a comparison to the Coalition’s policy on early access,” she said.
“Broadly, it’s not Coalition policy.
“The Shadow Treasurer knows that to materially undermine the system that was just ranked sixth in the world, would be pretty detrimental to his budget if he was to be Treasurer and the nation’s financial resilience.”
Do you think the Shadow Treasurer has been taken out of context? Do you think Australia will ever move to a more American style retirement system? Let us know in the comments section below.
Also read: Should we be able to access our superannuation early?
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Do I think this writer has taken comments, and drawn inferences, ‘out of context’? Yes.
Has the Coalition ‘called for’ a scrapping of compulsory Super? No.
Has there been a suggestion that potential home owners could access their Super for a home deposit, as they do in America – and probably elsewhere? Yes.
The reference to a 401 (k) was in relation to this one specific aspect of the American system NOT an endorsement of the whole, and certainly NOT a plan to scrap our superannuation system.
Why is this writer deliberately creating issues which do not exist?
Leave super alone, both sides of politics are constantly suggesting changes to our superannuation system, I’m not sure why either party wants to either increase the tax take or to allow early withdrawal of funds for any reason, both things defeat the purpose of superannuation. If you want to decrease the cost of housing I believe the easiest and logical method is to release land to new buyers, land has now become the most expensive part of home ownership, when I bought my first home land cost was about 20% of the cost now land is about the same cost as building the house, so if the government released land directly to new home builders that could be a massive reduction in the cost of home ownership. State and Federal governments would be responsible for putting in the infrastructure.
Typical of the LNP…..They want to condemn workers to a life of poverty in retirement while abrogating their responsibility to the nation. As for their proposed scheme (401 (k) model), would you trust your boss to run your savings???
It is a great idea to allow access to your super in order to buy a house. I also think that voluntary super is a much better idea than compulsory super. It works well overseas and is much less of an impost to employers. Compulsory super, as we currently have, puts a massive strain on small business – it greatly reduces profit and will eventually cause a lot of businesses to reduce staff levels so that they can remain viable.
Disagree. Suoer is for retirement not saving for a deposit on a house or anything else.
You advocate voluntary super. This won’t work as many businesses won’t contribute especially those that are profit driven or greedy like Qantas would off done under Joyce. Small businesses business model should allow for super like all expenses. Show me the data that paying employees super has sent small businesses to the wall. Many small businesses fold because of a number of factors, Super would be just a very small part of that.
our Super system works very well and is admired throughout the world as a good model.
A home of one’s own is the NUMBER ONE PRIORITY for a comfortable retirement. Only an idiot would suggest that it makes sense to force someone to stash hundreds of thousands in a superannuation account while paying a fortune in rent, then have to pay 20 times the price they would have paid for the home if they could have bought it early in their life. What a STUPID notion!
Our super model DOESN’T WORK WELL. We have a housing crisis, and homeless people and renters with hundreds of thousands of savings they can’t access and will need to blow in one fell swoop on retirement to buy the home they SHOULD be buying now.
Once the home deposit is sorted and the family is on the road to housing security, THEN they can focus on saving money that CAN be used for retirement living costs and won’t have to be blown on hugely expensive real estate.
When will people wake up?
The Coalition is NOT planning to introduce the American model.
This response is precisely why I concluded my comment with the reference to the writer’s motives in submitting his article.
It is articles and posts such as yours which create un-necessary angst based on speculation and unwarranted inference.
Governments just cannot help themselves. They expect identifiable results in the short term. Superannuation is a long term investment. By nature of the investment, it can result in returns and losses. I started superannuation contributions prior to compulsory superannuation being legislated. My initial contribution was 8% of $5,082 per year. Between 2000 and 2005 my superannuation returned some large losses. Since then, I received good returns allowing me to purchase a modest home in rural NSW with a little left over to invest further in order to increase my superannuation balance.
If superannuation hadn’t been compulsory I don’t believe I would be as comfortable as I am.
I am sure that others would be in the same situation as periods of high cost of living would result in many not contributing to their fund.
Superannuation might not be perfect but it does help many near or after retirement.
Super needs to be left alone as it becomes a slippery slope for not having alot of funds available when you do retire. One thing the government could look at is HECS/HELP debts which is one big reason, but not the only one, alot of people can’t afford homes. Young people and I would assume even people in their 40’s have huge debts that they are paying back, but the interest is crippling. Why are we making the younger people suffer so much with trying to enter the housing market? More land is needed for suburbs or satillite cities to appear and yes unfortunately we need to build up also in cities. But younger people need to realize that touching super will mean a reduction in what you will have when you can access your money for retirement.
There are a couple of things that need to be looked at here:-
What percentage of the deposit for the house will $50K be ??
How much is the withdrawer going to lose, in interest, by retirement ??
Using Median Fund Returns (for the past 10 years) of 8% then the approximate loss will be:-
15 years : $158K
20 years : $233K
25 years : $342K
30 years : $503K
Those amounts as a reduction in the final super balance is huge, and will make a significant difference in retirement lifestyle,
Good example of the impact this proposal has on retirement over the years. Will also impact pension payments were by it could also cost the government over the years.
And the person will pay at least $1 million more for a home that they might otherwise have paid off before retiring. These numbers say NOTHING because they don’t take all factors into account. So someone loses $158K over 15 years! The house they bought because they were able to access that $50K to help with the deposit will have increased in value by a heck of a lot more than $158K in 15 years. Housing values typically double every 7 years.
Once a family has a home, give it a few years to get comfortable with repayments and then they can put MORE into super, building it up faster, while their house also increases in value making sure their overall wealth is growing.
It is costing the government FAR FAR MORE to assist people to have a home because they couldn’t buy one earlier in life due to having to lock money in super. As homelessness and rents increase, the pressure on government will grow. An extra $503K in super will be totally worthless.
Both major parties are getting their claws into super. Originally the deal was that super acted as a compulsory saving, so that we could retire with an independent income and stay off the pension.
But now our governments see super as an all-purpose honey-pot to replace government funding of health services etc.
Eg,the new setup for nursing homes. If disaster strikes and you need permanent nursing home residence, you must pay upfront an Accommodation Deposit, which can be $1 million or even $2 million in some places.
Most don’t have that sort of wealth, so the nursing home owners, often international investment funds, impose a Daily Accommodation Payment (DAP) currently set at 8.34% of the Accommodation Deposit.
So on $1 million you must pay $83,400 a year, plus various other fees and charges, say $130,000 a year.
The median super balance for 65yo + is around $200,000, which won’t last long at that rate.
So in jig time you’ll be stony broke at the most helpless time of your adult life, and can’t afford medical services, health insurance, surgery, MRIs, transport etc.
Super is not protected and does not keep the wolf from your door – in fact it actually attracts wolves.
This must be called out – and changed.
People need to acquire some common sense and do the math sensibly. X can’t afford a home, but is piling money into superannuation at age 30. Now, if he could draw $100K now for a home deposit, he could buy at $700,000. He then pays repayments instead of rent, has security of tenure, can improve the house over time and increase its value, and meanwhile can put more into super because he’s not facing huge rent increases and moving costs every time a landlord decides to sell a property. He can quickly catch up that $100K because he’s soooo much better off paying off a home than renting.
Conversely, he’s forced to pay rent for another 35 years, and then he can draw his super (which has grown to a nice tidy nest egg) and pay $3 million for the same house he could have bought 35 years ago for $700K. Whoops! Superannuation GONESKY! No money for retirement living costs.
Oh, wait! The current plan is WONDERFUL for greedy landlords and superfund managers. It keeps the battlers right where the powers-that-be want them. Struggling, and DELUDED into thinking they have this wonderful super nest egg that is going to eventually make them rich!
The notion that super should be a higher priority than a home of one’s own is just daft and cruel, and would only ever be supported by either deluded fools or people who want to suppress the battlers. House first. Then you are well positioned to save for retirement, having already ensured you have the most important ingredient taken care of – a roof over your head.
Well done, LNP. And don’t let the lying idiots twisting the truth to fool the gullible deter you.
Here we go! More Yank bulls**t being fed to Aussies.
You can buy a house for a comfortable retirement, if you’re able. But come retirement, you can’t eat a house, or use it to pay medical bills.
You CAN borrow against it, or sell it and buy something cheaper. Super is useless if you have to use it to buy a house or to pay high rents. A house should ALWAYS be the first priority.
Both parties are eyeing super hungrily.
Aussie workers have diligently contributed and often sacrificed to build up the funds.
But now super is a big, fat pinata just begging to be smashed open by governments and big business, who cannot bear to leave it “wasted” in the hands of us plebs.
Eg, Check out this website advocating taking super to pay for your aged care:
https://www.smh.com.au/politics/federal/government-mulling-superannuation-as-part-of-aged-care-solution-20230803-p5dtj8.html
“We’ve got a crisis of funding in aged care. At the same time we have one-third of the value of funds being written out in bequests. That doesn’t square … It’s a conversation that we need to have … I don’t think we can carve superannuation out of it.”
Bottom line, super is not seen as “our money” – it’s the big boys’ money.
During the accumulation phase super has worked well for me.
Throughout a period of sickness in our family it has many failings in retirement mode especially if you are over 75 years of age.
Many people don’t know that if you are over 75 and pass the estate pays an inheritance tax of either 15 or 17% tax on your super.
So in reality the only option is too decide when you are going to pass and withdraw all your super and put in your bank prior to death.
Now that VAD is an option that’s exactly what retirees will opt for.
The tax rules work against the keeping of capital in case you need an agedcare home and RAD contribution is needed to pay the room cost.
Also , again if the RAD is paid back if the resident moves out and is over 75 it cannot be back into the super account from whence it came.
The super and tax laws are very agest and doing make and common sense at all.
It sounds to me that Albasleazy and his crowd are spreading more misinformation in their desperation to keep the government. They are wasting their time, and they will be lucky to have a seat after the next election.
all those making suggestions had got nothing else to do. They themselves are more than filthy comfortably rich in their own surroundings and want to lay their hands to get more out from those who has little. Why not suggest and help our own country build our own Aged care homes for its population instead of getting foreign companies coming in to rob our people. Aged care homes need not be single built homes like those currently. We build according to how much is affordable as we cannot be like those in Hollywood. P.S. Not everyone in Hollywood live a luxurious life. Look at the amount of homeless people in the streets. Do we want to be like that 20 – 30 years down the road?