Over Indebted Government Coming for Your Managed Super (Not SMSF!)

A couple of weeks back we wrote to the moves by the current government to possibly compulsorily take some of the $3.4 trillion of superannuation in managed funds in Australia and use these for ‘nation building’ projects.  This is a move we have been warning of for years now.  After that news we were joined on Gold & Silver Standard Insights by SMSF expert Cass Smith.  By popular demand she will join us again this afternoon, but lets see what others had to say on that news.  If you haven’t read the last article, it is a must read.

One of the more vocal about the touted changes was MacroBusiness Fund’s Chief Economist, Leith van Onselen.  Here is what he had to say:

“Several industry superannuation funds got into trouble at the beginning of the pandemic after investing far too heavily in illiquid unlisted assets, such as property and infrastructure. Therefore, do we really want them doubling down to invest in unlisted assets?”

“Former senior Treasury official Mike Callaghan argued that super funds should only invest in such projects if doing so is in the best financial interests of their members.

In a similar vein, Shadow treasurer Angus Taylor and Brendan Coates from the Grattan Institute argued that the primary purpose of superannuation is to provide for Australians in retirement. Therefore, they should only invest in assets that will provide a sound return.”

“A key problem is that despite compulsory superannuation being in effect since 1992, the primary purpose of superannuation is yet to be defined.

Several years ago, the Coalition tried to enact a bill that would define the core purpose of superannuation as follows:

“To provide income in retirement to substitute or supplement the Age Pension”.

Unfortunately, this bill never passed.

Accordingly, Australia’s compulsory superannuation system has been left at the whims of politicians seeking to use it as a tool to satisfy their own political agendas.

Australia’s superannuation savings should be managed above all else to maximise risk-adjusted returns and should be available if and when required by members.

The Albanese Government must recognise that Australia’s superannuation savings belongs to its members. It is their money, not Labor’s play money.”

Clearly, however, it has its eyes on it. From ABC News:

“The Assistant Treasurer told the round table there were many opportunities for joint cooperation between government and superannuation funds.

"There are many areas where the government can partner with the super funds to advance the national interest," Mr Jones said.

"Super funds are already major investors in assets that earn great money for members and produce huge economic benefits for the community [and] we need to find new ways to do this.

"Supercharging our economy with Australian workers' own savings is smart.

'Smart governments look for all available options to solve these [economic] problems. Engaging with our super funds is one way we can work together to do that."”

However the Australian Super Funds’ Association was clearly and rightly wary:

“"Identifying models for investment which work economically, both for the government and for fund members, will be key," it read.

"Where the Commonwealth can create pathways to prove out investment methodologies, there will be greater scope for superannuation fund investment.

"Orchestration of the policy settings will be crucial — requiring ongoing effort and collaboration by stakeholders."”

As van Onselen concludes:

“If the Albanese Government wants to invest in social housing or energy-related fields it should do so directly.”

Never underestimate the abilities of a desperate and over indebted government though.

We discussed Monday the demographic challenges ahead for China. Whilst not as severe, Australia is heading straight to an aging population problem of its own and it is one that will put more and more pressure on government and the pension scheme as, simply, there will be less workers supporting more (expensive to keep) retirees. Our fertility rate is low and our life expectancy increasing.  We also have that big lump of Boomers retiring. The Boomers giveth and will soon taketh away… The latest (2021) Intergenerational Report again talks to the burden on government with labour participation rates falling and the then current debt to GDP of 30% rising to 41% by 2024-25.  Well, enter COVID and big spending and that debt to GDP is already 45% in mid 2022! You can see where this is going then yeah?

Taking control of your superannuation through a Self Managed Super Fund has never been more critical to get both control and true diversification in uncorrelated liquid assets with minimal counterparty risk.  Desperate times see desperate measures.  Take control of your hard earned.

Join us this afternoon to welcome back Cass Smith to talk through all of this and post your questions below.

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