Super a political football that won’t go far

Debt Man column – The West Australian (Business)

For: June 25, 2010.

Bruce Brammall

Debt Man

There’s been a lot of talk about reality lately. And when people start talking about reality, they’re inevitably talking about someone else’s lack of a grip on it. They’re outside the gates of Neverland.

There’s the “Pim, is your heart really in this Socceroos thing?” reality. But it’s too late, he’d quit months ago.

There’s the “Mark, can you explain all these David Jones handbags on your corporate credit card” reality. But it’s too late. Mr McInnes has already left the country.

And then there’s been the “Kevin, who are those people behind you with knives?” reality. But the PM wouldn’t turn around. Until Wednesday.

That’s not what I’m talking about. (And, as it turns out, it’s already too late for K-Rudd. Canberra’s Supergeek managed to find a “hyperspace-reverse” gear on his popularity spaceship. Now, will Julia Gillard do the same on the Resources Super Profits Tax?)

No. According to the statistics, YOU don’t understand YOUR reality.

That’s right. You are going to retire poor. You won’t have enough superannuation. And when it comes to your living out your post-work years, your situation is going to be a case of “Reality Bites”.

According to the latest Household Income and Labour Dynamics in Australia study, there is a huge gap between your “retirement expectations” and your “retirement reality”. It’s a similar chasm between your “life expectancy” and your “savings reality”.

The most recent HILDA data was from 2007 – before the crash. Expectations back then should have been relatively rosy.

But even then it was clear we’re not putting enough away to cover our retirement lifestyles.

The HILDA survey suggested single women will have enough money in super to last two years in retirement – in the style to which they’ve become accustomed. Too bad they’re expected to live 21 years in retirement.

Men spend more time working and are paid more, but will only have enough super for five years. Retiring couples will do better, largely because of shared expenses.

You get the picture. Not enough super. Not even if you start saving hard now.

The reality is that Australians are unlikely to ever save enough for their retirement. And, sadly, it’s our politicians’ fault.

Superannuation policy, if you think about it, should be non-political. Both sides of politics should be able to agree on a system that will encourage Australians to save for retirement.

To help themselves primarily, but in doing so, help their country by not being so reliant on government handouts.

But Australians struggle to put away for their retirement, particularly when the ground rules for super change more regularly than any other laws in Australia.

Now, superannuation could actually become a key election issue. The government and the opposition have diametrically opposing super policies.

Canberra, this is superannuation! Not war policy. Not school funding. Not Medicare versus private health care. Policies where petty politicking is expected.

Superannuation has become part of the political class struggle, and is being whipped up by both Labor and the Coalition.

It kicked off in last year’s Budget when the Rudd Government cut the ability of older middle-income (and above) Australians to save for retirement by halving super contribution limits to $25,000 (which includes SG employer payments).

(Former Labor Prime Minister Paul Keating, the father of compulsory superannuation, said Rudd had made a “short-sighted” and “dreadful … shocking decision”.)

In this year’s Budget, Labor announced it wanted to increase the Superannuation Guarantee paid by employers from 9 to 12 per cent. Then Rudd turned it political by nailing the increase to the RSPT and company tax rate cuts. Enlarged super and company tax cuts mean the RSPT must become reality.

The Opposition promised the opposite, hoping to pick up the small business vote.

Australians faith in super hasn’t been strong in recent years, given the turmoil of investment markets. Further politicisation of superannuation won’t make the situation better.

Unless Gillard dumps the RSPT (and with it, 12 per cent super and company tax cuts), super might be a major issue at the next federal election. Older Australians may actually cast their vote primarily on super.

But you want reality? The reality is … if Australia’s politicians can’t agree on a 10-year framework for superannuation policy, then don’t expect Australians to embrace super and substantially prepare for their own retirements.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .