As the government seeks to legislate an objective of superannuation, it has come under fire for its plan to allow super funds to invest in “nation-building” projects such as affordable housing and renewable energy.
Speaking about the criticism last week at an Industry Super Australia event, Financial Services Minister Stephen Jones stressed that these investments would still need to deliver a rate of return that is in the best financial interests of members.
“If we can find a project which the government says is important and that project can be structured in a way that provides a great return for an investor, why wouldn’t we want to partner up with superannuation funds to get a great outcome in the national interest and a great return for members? We think we’re nuts if we don’t do that,” Mr Jones said.
“Think of it as a Venn diagram. You know, national interest, members’ financial interest, whereas the overlapping bit, they’re the things that we should be looking for areas to partner in. But if there is no overlap, it’s absolutely not the job of superannuation to be solving other social policy failures.”
Mr Jones pointed out that many Australian superannuation funds are already investing in a significant amount of infrastructure, and that the government wants to elevate these investments to a new level.
“As we sit today, there are superannuation funds of workers in Canada, in North America, in Denmark, in Singapore, whose representatives are here in Australia, saying ‘we want to invest in some of the stuff that you’re doing’, whether it’s housing and commercial property, or whether it’s infrastructure or healthcare delivery,” he said.
“So, we say to ourselves as a government, it’s a bit weird, isn’t it? If, you know, we’re partnering up with the superannuation funds of workers in other countries to deliver projects of a social benefit, but we’re not doing it with our own citizens’ superannuation funds.”
Three pillars lie at the success of Australia’s unique superannuation system
The Minister also highlighted three key pillars that he believes underlie the success of Australia’s superannuation system.
He identified universality as the first of these three pillars, as the superannuation guarantee applies to all full-time, part-time and casual workers in Australia.
Meanwhile, the second pillar of success, according to the Minister, is preservation.
“It’s not like an ATM that you can tap into and out of, it’s preserved for life and that’s a part of the secret,” Minister Jones said.
“There is a reason why your superannuation fund over the last decade has had average returns real of between 6 and 8 per cent, as opposed to what you’re getting in your savings account, which you’ll struggle to get 1.5 to 2 per cent real, and that is because it’s preserved until your retirement and that means it can be invested in higher performing assets.”
Alongside preservation and universality, Minister Jones identified super’s “unique governance model” as the third pillar, which he said ensures employees have a say and are represented.
“Those three pillars lie at the success of a system that is unique around the world. We need to enshrine the objectives in legislation, because we’ve had a whole bunch of kooky ideas that have been recycled through public debate,” he said.
Among these ideas is using super for housing, paying down HECS debt rather than putting money into super, and being able to access super for healthcare or in a crisis.
“What lies at the heart of all of them? A failure in some other area of public policy. Domestic violence policy, healthcare policy or some other area of policy,” said Minister Jones.
“I just think if we try and make super the answer to every other failure in public policy, it will actually fail in the one that was set up to address and that is to provide workers, all Australians, with a dignified retirement and savings for that purpose.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
