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Research says 12% critical as Treasurer adds weight to freeze fears
The legislated super increase to 12 per cent is critical for the financial security of low-income Australian women in retirement and even more urgent in the wake of the economic shock of COVID-19, according to a new report from think-tank, Per Capita.
The report – commissioned by Women in Super and released at this week’s Women Super’s Summit –argues that 12% SG could bridge the gap between retiring in poverty and retiring with financial security.
“Given the proportion of women exiting the labour market during motherhood who return to part-time work, and who, on average, earn 14 per cent less for the same work as men, a higher rate of compulsory employer contributed superannuation can accelerate the accumulation of retirement savings, and bridge the gap between retiring in poverty, and retiring with an adequate income to provide a life of frugal comfort in older age,” the report says.
The Per Capital report comes as Treasurer Josh Frydenberg added weight to fears the Government is preparing to break its promise on the legislated commitment the SG timetable.
Speaking on ABC radio today, the Treasurer confirmed the Government was “considering its options” about the SG timetable in light of COVID-19.
“You’ve heard from no less an authority than the Governor of the Reserve Bank of Australia who said that an increase to the Superannuation Guarantee will lead to less income. Less income leads to less spending. Less spending leads to less jobs. Don’t get me wrong. I’m all in favour of superannuation. I think it’s very important that people save for their retirement. But there is a trade-off, and the trade-off is between wages and saving for retirement,” he said.
However, the Per Capita report calls out the argument that lifting the SG will reduce wages or pay rises for low income workers.
“It is workers on the minimum wage, whose pay rates are set by arbitration under the award system, who will benefit from an increase in the SG. Higher income workers on Enterprise Bargaining Agreements, or those with individual workplace agreements in professional roles, are more likely to be receiving superannuation contributions in excess of the SG rate already.”
Per Capita’s analysis shows that since the super freeze in 2014, a worker on the full-time median wage has lost more than $4,300 in superannuation. During this time, their net income fell from $56,524 to around $55,432.
The research concluded there would be no reason to expect the losses would not compound during the next five years if the SG rate is again frozen at 9.5 per cent instead of incrementally raising it to 12 per cent.
Early release applications continue to slow
The rate of applications to the COVID early release scheme continues to slow, with APRA’s most recent data for the week ending 23 August, showing 59,000 applications were received by funds. This compares to 70,000 applications in the previous week.
Of the applications received by funds, 35,000 were initial applications and 24,000 were repeat applications. This brought the total number of initial applications to 3.1 million and repeat applications to 1.2 million since the inception of the scheme.
Since the scheme’s inception, more than 4.3 million applications have been lodged with the ATO, and $32.2 billion has been paid out.
Senate releases fintech report
A Senate Select Committee has this week released recommendations on how on the Federal Government can encourage greater innovation in the financial services sector.
The recommendations, contained in an interim report from the Select Committee on Financial Technology and Regulatory Technology, included a recommendation that Consumer Data Right (CDR) be extended to other financial services, starting with the superannuation sector and then including sectors such as general insurance.
The Senate has also recommended that the Government foster a culture where superannuation funds invest more widely, including in Australian startups, without undermining the sole purpose test.
AIST’s submission to the Committee reaffirmed our support for the use of CDR to allow members to share relevant information with their super funds. We also emphasised the need for super funds to receive (with members consent) information held by banks under the Open Banking initiative, though the report was silent on this issue.
The report makes no recommendation about the regulation of AfterPay.
ACSI appears at Rio cave destruction inquiry
The Australian Council of Superannuation Investors (ACSI) has appeared before the Government Committee Inquiry into Rio Tinto following the company’s destruction of 46,000 year old caves at the Juukan Gorge in Western Australia.
Speaking at the Inquiry hearing, ACSI CEO Louise Davidson said the destruction represented a clear example of an ESG issue that damages a company's social licence to operate.
The Committee, chaired by Liberal MP Warren Entsch, questioned Ms Davidson and ACSI Executive Manager of Governance Engagement and Policy, Ed John on their engagement with Rio Tinto and their expectations of accountability on the issue.
The Committee heard that ACSI had met with Rio Tinto to understand how the disaster occurred and what changes the company will make to avoid another such event in the future.
Ms Davidson said ACSI had highlighted the need for issues beyond just legal compliance to be explored. This included “a broader perspective that incorporates Rio Tinto's culture and board oversight and systemic issues within the company, as well as the views of the traditional owners and Aboriginal communities.”
Questioned on what ACSI expect in terms of accountability, Ms Davidson said ACSI would wait to see the outcome of the Inquiry’s review, but that there were a range of additional accountability measures that the company might consider.
“That might include further financial penalties or it might include demotion or even termination of responsible executives. But our view is that the board is really the responsible entity for making those decisions.” Ms Davidson said.
ACSI’s membership includes 38 Australian and international asset owners and institutional investors, that collectively own 11 per cent of Rio's Australian listed shares.
Regulators release updated corporate strategies
Financial regulators APRA and ASIC have both released updated corporate strategies through to 2024, reflecting changes to their regulatory functions and operations brought on by the COVID pandemic.
The updated corporate plans set out how ASIC and APRA will continue their strategic priorities and actions over the next four years.
In addition to addressing the impact of the COVID pandemic, the corporate plans consider longer term threats and harms in the regulatory environment and how each regulator intends to support the long-term recovery of the Australian economy.
Read the APRA 2020-2024 Corporate Plan
Read the ASIC 2020-2024 Corporate Plan
ASIC signals extension to COVID advice-related relief
ASIC has indicated it will extend the temporary ‘no-action position’ for superannuation trustees to expand the scope of personal advice to be provided by the superannuation trustees as ‘intra-fund advice’.
The relief measure that ASIC announced in April is set to expire on 15 October 2020 (for the relief in the instrument) and 24 September 2020 (for the no action position in relation to limited intra-fund advice).
Having monitored the appropriateness of the relief measures with regard to the ongoing impact of COVID-19, ASIC is considering extending relief measures by a further six months to 15 April 2021.
The no-action position will be extended to 31 December 2020 in order to align with the extended application period.
If you have any feedback on the proposed extensions, contact AIST Head of Advocacy, Mel Birks firstname.lastname@example.org
APRA opens Superannuation Data Transformation consultation
APRA has released the final consultation package for Phase One of its project to expand the breadth, depth and consistency of its superannuation data collection.
As stated in a Policy Alert this week, the Superannuation Data Transfer consultation package provides topic papers, draft reporting standards and data collection templates for fees and costs; insurance arrangements; expense reporting; and asset allocation.
Due date for submissions
Topic Paper 4 - Expense Reporting
2 October 2020
Topic Paper 5 - Asset Allocation
16 October 2020
Topic Paper 6 - Insurance Arrangements
30 October 2020
Topic Paper 7 - Fees and Costs Disclosed
13 November 2020
AIST will work with APRA to co-ordinate feedback from AIST members ahead of finalising the nine reporting standards linked to Phase One.
If you would like to nominate to be involved in the consultation, please email Mel Birks, email@example.com
AIST’s weekly update on the status of legislation
The current status of superannuation Bills currently before Parliament can be found here.