Many companies pay good money for their executives to attend conferences where at least one speaker can usually be relied upon to say, 'Change is the one constant in the modern world'. Change is the last thing those who run Australia's superannuation industry want to embrace.
And little wonder. They inhabit a cosseted world in which the money pours in each day, thanks to a combination of government compulsion, massively costly tax concessions and the misguided backing of key Labor and union leaders. The upshot of this assistance — far greater than the car industry enjoyed — is that Australia now has the world's fourth biggest funds management industry, yet only the 12th largest economy.
But the foundations of this empire are coming under a growing attack. Most criticism focuses on how the tax concessions create an expensive form of upper class welfare, while being of little value to most other people. The harmful effect of compulsory super's artificial expansion of the finance sector is also attracting attention.
The Abbott Government shows scant concern about either aspect. Its terms of reference even stopped the Commission of Audit from including the concessions in its long list of recommended cuts to direct spending on welfare, education, science and many other areas.
However, the Commission's chair Tony Shepherd, who formerly headed the Business Council of Australia, says these concessions should be cut. So does former Coalition leader John Hewson, some business economists, financial planners and other beneficiaries of the existing system. Treasury head Martin Parkinson recently expressed concern about who gains most from the system. Parkinson, who is being forced to resign by Abbott in December, asked, 'If it's a wealth creation tool, who is ultimately benefiting from this?'
Fairfax Media gave a clear answer on 22 May when it reported a tax lawyer as saying, 'These are people with $10 million to $20 million in self-managed super. They've funded their retirement several times over. They don't need concessions.' Another adviser said, 'There are probably 30 different strategies motivated by tax minimisation rather than a desire to self-fund one's retirement.'
The Fairfax report said that almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years. Some have over $100 million. Given that 92 per cent of SMSFs have only one or two members, many could easily have an income from super of $500,000 a year