Re-engaging youth: a ‘super’ problem

Throughout the Cooper review process, the issue of disengagement with superannuation was frequently raised and debated. It was widely acknowledged across the industry that younger Australians tend to be particularly disengaged. The reasons for this appear to be varied:

‘Super is too complex.’
’I’m not retiring for another 50 years.’
‘I’ve only just started my career, why would I think about retirement?’
‘I don’t earn enough to worry.’
‘I’ve got better things to spend my money on!’

Anyone involved in superannuation and the broader accounting and financial services industries understands the benefits of starting early to save for retirement. Older Australians often regret their late consideration of superannuation. The question is, how do we get the message of early saving in superannuation through to younger people? Just as importantly, how do we get them to care?

Education is a large part of the answer. Students should be taught about financial literacy in schools. This is important to ensure students understand basic financial concepts, including superannuation. Younger Australians need to be aware of the benefits of starting to save for their retirement from early in their working lives.

However, education can only go so far. Let’s face it - I can teach my kids about all the great benefits of broccoli; it doesn’t mean that they will eat it!

I’m curious to know what others have to say on this issue. In an age of instant gratification, does there need to be a more immediate and relevant incentive to start saving? (Tax incentives to a low income earner may not be very appealing.) With an ageing population, we cannot over-emphasise the importance of superannuation. Unfortunately, if Australians don’t start to engage with their super early in their working life, it may be to their detriment in retirement.

Superannuation: ‘leaking revenue’?

I recently read the “red book” - a document that Treasury provided for the returning Gillard government. The red book’s purpose is for Treasury to identify the economic pressure points for the new government. While many of their points were interesting, I found the comments by Treasury on superannuation frustrating. They stated that “the superannuation system is increasingly leaking revenue, with Self-Managed Super Funds now the tax minimisation vehicle of choice”.

With SMSFs finally being ratified as a “largely successful and well-functioning” sector of the superannuation industry by the Cooper Review, it concerns me that the comments from Treasury may have a negative impact on the sector. With many of the misconceptions about SMSFs finally being put to rest, it is perplexing that Treasury would imply that those with SMSFs somehow have access to special rules or are otherwise abusing the system.

Let’s be clear - there are no special tax laws available uniquely to SMSFs that currently enable some sort of “tax rort”. SMSFs access the same tax laws as all types of superannuation funds, albeit that they are generally able to manage and utilise them more effectively than their larger counterparts. Furthermore, to refer to the use of legitimate tax laws that are available to any taxpayer as “leaking revenue” is inflammatory and misleading.

Early in 2010, the Cooper review identified SMSFs as a strong and robust sector of the super industry. After many years of public scrutiny, this greatly improved the perception of SMSFs. Any implication that SMSFs are somehow cheating the government of revenue will only encourage old prejudices and bias to resurface.