(03) 9020 2905Superannuation has always been such a promising child – that junior at the sports carnival with awesome potential.
A talent that made you tingle. You didn’t have to watch it for long to see that it could be anything and everything to everyone.
It could both be a great wealth-creation dream for sparkly eyed go-getters and a warm security blanket for the fearful. And it could deliver on the million dreams in between.
Sadly, it’s just not doing it. A prodigious talent is being wasted.
What’s really holding superannuation back? It’s the same thing that holds eight out of 10 freakishly talented kids back from reaching their potential. Okay, I’ll say it.
Inconsistent ratbag parents!
From the day it was born, super’s problem has been the idiot parents raising it. Every time we get a new government, we get a new team of dipsticks who believe they can improve performance with a new training regime.
They mean well. But everything they touch turns to crud. Like Frank Spencer in ‘Some Mothers Do ’Ave ’Em’.
That’s not a crack at this government. It’s a crack at every government and every minister who’s ever had responsibility for super. Punters don’t understand the rules, because the rules keep changing every year.
“Ross” recently emailed me: “Here we have the football game of superannuation being changed almost every time the game starts. One never knows whether the goal posts will be moved, the size of the field changed, the rules modified, the referee replaced or quite often in recent times, which way our team is actually running once the whistle blows.”
Critics have been saying this for some time. Super needs to be simpler. It needs to pass the Forrest Gump comprehension test: “Stupid is as stupid does”.
The government went off and commissioned their own study by Colmar Brunton. And it showed … surprise, surprise … confusion over the rules are bordering on endemic, particularly among Gen Xers, or those aged 30-45. They found Australians want to understand super, but they can’t keep up with it.
Super’s last huge restructure only occurred in 2007. The good done then was partially undone in 2009. And now there’s more big changes in the wind.
Some of the proposed Gillard Government changes, including MySuper and banning commission payments, should impact fairly evenly and positively.
Others will impact unevenly. The Superannuation Guarantee will rise gradually from 9 to 12 per cent, super contributions tax will be rebated for people earning less than $37,000 (worth up to $500), and the contribution limit for older workers with smaller super balances will be lifted.
Here’s a tip: Every time the rules change, check to make sure you’re not the one being screwed.
Those getting screwed this time are those aged between 30 and 50 – Generation X – who are going to suffer for reasons beyond their control. They started work too early, earn too much, but are currently too young.
Gen Xers are going to have to change some habits. Here’s what they should do.
- Xers will have to start making larger contributions to super earlier. The old rule about “piling into super at 50 when the kids are off your hands”, has to become “start building your super at 40, despite the mortgage and the kids in nappies”.
- Make sure your super is invested appropriately for your age. At least 60 per cent, but more like 80 per cent, of your super should be invested in shares and property. If you can’t see it listed on your most recent statement, call you super fund and ask them for your “asset allocation”.
- Start salary sacrificing a little now. An extra 3 per cent could make a huge difference at 65. If you get a big payrise at some stage, consider sacrificing half of it to super.
The Colmar Brunton survey is more proof that the basis underpinning the recommendations of the Cooper Super System Review – that Australians “shouldn’t have to be interested” in their super – was flawed. Australians want to know more about their super. They want to see that promising child develop the potential to fulfil their dreams.
Or maybe we just call in the Department of Child Protection to remove superannuation from the ratbag parents and hand the ability to set the rules to an independent body, such as the Reserve Bank.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .