The results of a recent Association of Superannuation Funds of Australia (ASFA) survey should serve as a wake up call to super fund providers, Assistant Treasurer Mal Brough said today.
Mr Brough said the glaring omission from media analyses of the survey was the bottom line conclusion by ANOP, who conducted the survey, that there is a need for greater promotion and reinforcement of the relative merits of super.
"Respondents ranked super well down in their list of preferred ways to bridge the retirement fund gap – behind working longer and other investments. Industry clearly needs to do more itself to promote super as a means of bridging that gap."
"Fund managers must sharpen their pencils and improve returns or risk falling behind in the new competitive environment."
Mr Brough said the survey reinforced two key messages the Government has long advocated: people need to save more, and many mature aged people have a need and desire to work at least part-time in 'semi-retirement'.
"This is not new. The survey shows Australians recognise the reality of an ageing population and, as a result, are examining their retirement options," Mr Brough said.
Mr Brough said the overwhelming majority of respondents recognised they have the primary responsibility for preparing for retirement and increasing their super (56% said individuals had primary responsibility compared to 32% who said Government) but according to the survey the industry needs to do more to promote the positive benefits of superannuation.
The ANOP analysis for ASFA said:
"The results indicate a need for more promotion of the merits of super"(p9)
"The study shows that many would like to continue in some kind of work in retirement, and access to super while working in retirement will also be an increasingly relevant issue. While the community would like more incentives from Government to save for retirement, existing tax benefits and co-contributions should be part of the positive communications themes about super." (Key Implications, p 12)
Mr Brough said the Government had been playing an important role. Choice of funds and new disclosure laws are already putting pressure on fund fees, and the Co-contributions scheme is providing vastly better results for individuals while being more cost effective for the country than proposals for contribution tax cuts.
"For example, a worker on $25,000 per year can increase retirement savings by up to $106,000 over 30 years of working life, compared to just $3,000 under Labor's tax proposal.
"Furthermore the Government is considering options for improving education and financial literacy to make people more confident in their investment choices. This includes $14 million to provide information on Super Choice and $2 million towards an information and education strategy based on the work of the Consumer and Financial Literacy Task Force headed up by Paul Clitheroe."
"Super Choice will make funds compete and promote their benefits, creating downward pressure on fees and increased emphasis on returns.
"The emphasis on tax cuts from some sectors of the Industry and from Labor, who still can't explain how it will be funded, is a lazy option which neither promotes the existing beneficial tax treatment of super nor provides incentives for extra savings to meet the retirement income gap."
"A one or two per cent tax cut on contributions would provide little benefit to lower and middle income earners and is an inferior option to the Government's Co-contribution for those who recognise they need to save more and want more bang for their hard earned buck."
Media Contact: Carlie Hogan - (02) 6277 7360