Investing in infrastructure through superannuation funds could impact the sustainability of Australia's retirement framework.
At the 2012 Association of Superannuation Funds (ASFA) National Conference held in Sydney, Department of Treasury secretary, Dr Martin Parkinson, said that the growth of superannuation in Australia has led to large amounts of money looking for viable investment options.
"At the same time, there is a range of investment projects and business opportunities looking for funding. This sounds like a perfect match. Indeed, some funds are already doing the sums and deciding that these infrastructure investments will improve returns for their members," Dr Parkinson said.
"However, given infrastructure can be a high-risk investment, and adequacy depends on managing the balance between risk and return, I consider it important that trustees make investment decisions based on the merits of the investment itself," he said.
He explained that making it mandatory for superannuation funds to invest in infrastructure, or introducing more tax concessions to encourage increased infrastructure investment, may lead funds to make decisions and take on risks that they otherwise would not deem prudent.
"Myself and others have concerns about the impact this direction would have on the integrity and fiscal sustainability of the retirement system," Dr Parkinson said.
He also highlighted the ageing population as another future challenge facing the superannuation industry, particularly in terms of fiscal stability.
"We are ahead of the game in seeking to address this fiscal pressure by closing defined benefit systems for the public sector while compulsory superannuation is taking pressure off the age pension. The question remains, however, whether the current framework for our superannuation system will be sustainable into the future," Dr Parkinson said.
"While changes to the superannuation guarantee have been important for improving adequacy, they will clearly come at the cost of forgone revenue. Also, governments over time have introduced a range of concessions that encourage increased voluntary savings in superannuation. Again, these concessions come at a cost, a very significant one.
"With the Commonwealth budget coming under increasing pressure over the next few decades, the fiscal sustainability of all policies, including superannuation, will demand greater public scrutiny. This scrutiny will be even more important, to the extent that existing concessions are seen to favour some at the expense of the majority," he said.
