Comment
Super rules: why choose a sledge hammer to crack a walnut?
with Brian Shakes
By now I imagine you will have read enough about last month’s Federal Budget to do you for a long while, so I won’t add much – just a couple of comments.
Firstly, it seems to us that moves to stifle the growth of self-managed (DIY) super funds – or at least to limit these funds’ ability to provide the same pensions as those provided by the large commercial providers – is a retrograde step.
Not only is it a retrograde step, it will take thousands of dollars of income from new retirees.
A superannuation regulation (SIS Amendment Regulation No. 2) was gazetted on May12, and may by now have been challenged in Parliament. Let’s hope so, because by law there are only 15 parliamentary sitting days after gazettal in which objections can be validly received.
This regulation prevents the establishment of defined benefit funds with fewer than 50 members. The upshot of this is that most small and self-managed super funds will be prevented from providing lifetime and life-expectancy defined benefit pensions.
This means if DIY fund members want access to either of these forms of pension, then it will have to be ‘bought’ from outside the fund, from a commercial pension provider. Typically this would reduce returns to retirees by 25-40 per cent.
I know part of the reason for the change is to reduce the ‘creative’ use of the DIY fund structure for reducing taxation obligations. The aim is also to reduce risk by broadening a fund’s member base to cover the lifetime guarantee risk. These I understand.
But this new regulation will catch out many who prefer choice to compulsion, and seems to go against the Liberal Party’s ethos and rhetoric. There must be an easier way.
The other budgetary item I want to mention briefly is the increase in charges for nursing home residents. This means a nursing home can increase its charges by up to $854 a year, and the rise is likely to hit many residents – and their families and support people – hard.
Nonetheless, operators in the aged-care industry say this won’t even meet current cost increases, let alone let them prepare for future service demand. The increased charge is part of a package that will see the industry receive some $877 million, much of it to be dependant on care providers proving their financial credentials and willingness to provide staff training.
I don’t know the answers and in an election year budget I didn’t expect to find any really hard decisions on aged care. But they will have to be made at some stage; like the rest of the Western world, we in Australia face a huge increase in the cost and complexity of aged care over the next few decades, with no easy – or easily affordable – answers.
Brian Shakes is Chief Executive Officer of Over 50s Association.
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