The Morrison government now has less than 90 days to decide what to do with superannuation’s “40-year promise”.
In-between botching its vaccine roll-out and botching its response to historical and contemporaneous sexual assault allegations in Parliament House, the Morrison government has also found time to botch the implementation of one its most significant policy reforms: Your Future, Your Super (YFYS).
“The proposed commencement date of 1 July 2021 is now between 80 and 90 days away, and given that the bill has not yet been passed – and we haven’t seen the draft regulations and some of the complexities that have been alluded to in the submissions you’ve received – the question of whether there is sufficient time to implement the measures efficiently and effectively has to be addressed,” ASFA chief executive Martin Fahy told the Senate Economics Legislation Committee on Wednesday.
And these aren’t tweaks to the system either, the policy equivalent of popping the bonnet and tightening the radiator cap. These are sweeping changes designed to alter the fundamentals of how superannuation has worked since its creation – changes that are almost entirely untested, with far-reaching implications for funds and their members.
“The reality here is that on a 50-basis point test…a member whose fund performed at 50 basis points below the benchmark doesn’t receive any information or correspondence,” Mr Fahy said.
“The member whose fund performed at 51 basis points will receive correspondence and over a two-year period see their fund effectively put into lock-up. That one basis point is essentially a bad afternoon in the markets, an unhedged position, or the impairment of a single asset.”
That’s not say there’s anything wrong with making changes to superannuation. It shouldn’t be a sacred cow – and it absolutely shouldn’t go unscrutinised – when it’s responsible for looking after the money of millions of Australians.
But as Mr Fahy noted, superannuation is also the “40-year promise”. The Morrison government is trying to push through untested changes to that promise at a breakneck pace, and potential unintended consequences might not become visible for decades. Even the relatively short two-year trial period that Mr Fahy proposes would significantly ease concerns about the side effects of YFYS.
But the Morrison government shows no signs of slowing down, and the largely unchanged legislation that recently appeared in Parliament shows that Mr Fahy’s concerns – and those of other stakeholders – have fallen on deaf ears. Other issues loom: for example, the matter of what do with the legislated SG increase.
Danger: crash ahead.