MATTHEW PANTELIS:
Now the federal Treasurer has flagged and I think today is giving a speech to this effect. Big reforms on how retirees will be able to use their superannuation with more than 2.5 million Australians to retire in the next 10 years. Changes to regulations will allow super funds to distribute payments through instalments instead of an upfront lump sum. Money‑back guarantees reform slated to kick in from the middle of 2026. The Assistant Treasurer, Stephen Jones is on the line. Assistant Treasurer, good morning. These changes –
STEPHEN JONES:
Good morning, good to be back with you.
PANTELIS:
Indeed. You think these changes obviously are much needed?
JONES:
Yeah, absolutely. You know, super has done a great job of accumulating retirement savings for people. The average retirement balance is about $200,000 at retirement now. So, that’s real money. But what’s not in place is everything that needs, the retirees need to turn that into decent income stream for their retirement. So, they’ve got security in retirement. They have, you know, they’re making the best use of that money and making the best decisions about it. So, that’s what this next phase is about. Better information and guidance, better products from funds and others to ensure that they have options available to them. So, that’s what the next phase of these reforms is about.
PANTELIS:
Okay, so mid ‘26. Now obviously, you’re taking into account all the baby boomers and probably even maybe some the next lot.
JONES:
100 per cent. My kids call me a baby boomer, I tell them they’re wrong. But yes, 100 per cent. It’s about those, it’s about 2 and a half – there’s actually about 5 million Australians if you put those who are currently at retirement and those who are approaching it. And we need to ensure the system is well set up for what is a large number of Australians. We need to reform our financial advice laws so there’s more avenues for advice and more advisors. And we’re doing that.
But this stuff today is about ensuring that the ASIC, the Moneysmart website is a reliable portal that people can go to. And there’ll be some calculators and some really user friendly information available to retirees and people approaching retirement on that site. But it’s also about looking at where some of our laws and regulations and tax arrangements are not appropriately allowing funds to provide what we call retirement income products. Now, your listeners will probably brace when we hear describing financial things as products. But that’s how they talked about in the industry.
Some people might be familiar with things like annuities and those sorts of things. What they do is they provide a regular reliable income stream for people who put their money up front and enable them to purchase one of these income streams. They therefore have security over the rest of their life about how much income is going to come in over the course of the remainder of their retirement. And we want more of that stuff available to people, more info and remove regulations which making it hard for people to take those options up.
PANTELIS:
All right. The issue that came about 18 or so months ago, the $3 million tax hit on superannuation super funds with more than 3 million. I’m never going to have to worry about this, incidentally, but surely at some point you’re going to have to index that. You absolutely will at some year in the future or a future government will.
JONES:
Almost certain that a future government would do that. It’s the normal thing in our tax laws that these things aren’t indexed. Other things within the superannuation system aren’t indexed. But yeah, you’re right. Okay, you’re right. At some point down the track they will be indexed. I don’t think I’ll ever hit it. 99.5 per cent of your listeners will never hit it. But sometimes down the track obviously have to look at those thresholds.
PANTELIS:
Are these changes needed because people are running out of money? Is that it? The super’s just been drawn down too quickly.
JONES:
Almost the opposite in some instances. And people are living more frugally and less well than they need to. If that’s a decision they’re making because that’s how they want to handle their money, then that’s fine. But if it’s a decision they’re making because they don’t know what their options are, then that’s not fine. And we want to ensure they have more tools available, more information available and more options available for them in retirement so they can take some of the worry, for example, out of how far their money is going to go by taking out an annuity or that style income stream product. And importantly, that they have information and advice to ensure that that option is in their best interest. If it’s not, they can continue on the way they are. But we don’t want them making poor decisions because they don’t have options available to them.
PANTELIS:
Colin has called through off-air. He says he’s retiring in ‘26. Will he be able to take out a lump sum to pay off the house?
JONES:
Yes, he will. Nothing in these laws will change any of those arrangements. It’s about adding to and providing more options, not removing the existing options that are available to Australian retirees. It’s your super. It’s your money. And if you decide you want to take a lump sum out and use it to pay off your mortgage and other things, that’s fine. But if you also think, ‘oh, I wouldn’t mind guaranteeing, I had for the remainder of my retirement $500 a week coming to me in a secure income stream, how could I set that up then?’ Then, we want to ensure that those sorts of products are available to people as well.
PANTELIS:
There’s always been annuities in super, hasn’t there though? I mean, that’s not new.
JONES:
There are, they’re very common overseas, less common here in Australia. Only a small proportion of retirees are taking these things up sometimes because they can’t afford the entry price. So, one of the reforms we’ll be putting in place is to ensure that instead of paying a lump sum upfront that you might be able to do it, that you can do it in instalments, if that’s your option, still get the income stream, but pay for it in instalments. So, a bit of flexibility around those sorts of things. So, basically we’re just looking for ways to make the retirement system better and to do what it’s supposed to do, and that is give people the dough they need to live a happy, wealthy, relaxed, comfortable retirement to do all the things they want to do in it.
PANTELIS:
Do you reckon we need better education at the start of it for people entering the workforce? And I was fortunate in my first full time job was with an insurance company and they had superannuation as part of the deal. So, I got started very early. But I got to tell you, as a 17 year old, your eyes glaze over when they say, here’s your superannuation, sign here. And you don’t know what it means. You’re just signing away at what they give you. And fortunately, it was a reasonable deal. But I think that early education, particularly for young people, the last thing they’re thinking about is retirement and superannuation when they’re getting going.
JONES:
Mate, you and I were the same. You tried to have a conversation with me at the age of 19, I’d be saying, but I want to buy a car or I want to go on, on this overseas holiday, which is the magic juice in the superannuation system is you pay a little bit each fortnight. It’s preserved until you hit retirement. And when you have retirement, you have that money available to you. And a good rule of thumb, your superannuation doubles every 8 years. So, you know that $3,000 that you might have in your account as a 17 year old pretty quickly amasses to several hundred thousand dollars if you keep adding to it over your lifetime. So, that’s why preservation is absolutely critical here.
PANTELIS:
Yeah, absolutely. All right, so these changes to start July 26th presumably, and I don’t imagine there’d be any opposition through parliament to get them through.
JONES:
Well, really hope not. It’s 100 per cent pro‑consumer, 100 per cent pro‑retirees. More information, better products, more flexibility, more options. Not taking existing options off the table, just adding to them. So, you’ve got more things that you know, more ways of having a happy, healthy, wealthy retirement.
PANTELIS:
Is there a bigger tax take to the government, to government coffers as a result of this?
JONES:
Zero, zero. It’ll cost a little bit for us to reinvest in the Moneysmart websites, but no, absolutely no tax or revenue impact for us on this one.
PANTELIS:
All right, thanks for your time this morning.
JONES:
Great to be with you.
PANTELIS:
Stephen Jones, Assistant Treasurer. Superannuation changes the government wants to introduce over the next few years.