The journey into super reform is just beginning...

After nearly six months of anticipation, this morning, Assistant Treasurer Bill Shorten responded to the recommendations of the Super System (Cooper) Review.

While there were no surprises in the government’s response, the overall announcement on super reform is momentous in its implications, and this morning I had a chat to Carson Scott on Sky Business News on some of the highlights.

I mentioned that people are reluctant to commit to super because they are concerned the rules surrounding it won’t be the same when they retire. There have been so many changes to the super system in the last 20 years that many Australians either lack confidence in the system or are simply disengaged from it.

The reforms – designed to reduce fees, address lost super, provide a simple, cost-effective default fund product, and deliver access to meaningful and comparable information on super accounts – will be a great first step in ensuring Australians regain their confidence in super.

But despite the positive start to super reform, there are still some loose ends if you look at the bigger reform picture. Choosing to link the super guarantee (SG) increase with the package of reforms that includes Minerals Resource Rent Tax (MRRT) is one example. Because the process around implementation of the MRRT is far from certain, there is a risk of the whole thing falling through.

However, there are other ways of achieving the same objectives of an SG increase. You might remember that the Henry tax review report suggested leaving the SG rate at 9%, and instead adopting a number of other reforms which would have the same net effect on retirement savings as raising the SG rate to 12%.

One real win in today’s announcement, though, is the consultative approach the government is taking by involving industry experts in the technical detail of the changes.

While there is still a lot of work to be done, the government’s commitment to superannuation reform in the best interests of working Australians will go a long way to boosting and protecting retirement savings. The journey into superannuation reform will not be short, but it is a worthy initiative – I believe we are taking steps in the right direction.

If you’re interested, our media release has more information.