WEEKLY E-MAIL

26 September 2022

WHAT ROLE DOES SUPERANNUATION PLAY IN THE AUSTRALIAN ECONOMY?

By Sam Eley

There has been much talk over the past few months regarding the huge amount of wealth held in superannuation and its purpose and role going forward. Dr Jim Chalmers, the Treasurer, has spoken often in recent times about his hope to utilise the $3.3 trillion (as of 30 June 2022) in superannuation to put towards nation-building investments, such as social housing and clean energy. The Treasurer also commented on the underfunded Aged Care sector, and what role superannuation could play to assist with funding in this sector.

Under section 62 (1) of the Superannuation Industry Supervision Act 1993, super funds must be maintained ‘solely’ to provide ‘core’ benefits in retirement and death and/or an ancillary purpose, such as disability benefits. The sole-purpose test was designed to focus on the core importance of Superannuation – to provide for Australians in their retirement.

Former Prime Minister Paul Keating also weighed in on this topic, warning superannuation funds to not take their social licence for granted, and that they should be thinking about how to facilitate access to housing rather than simply chasing returns by investing in offshore companies. Keating said that “if super funds just think they can go buy tech stocks in America and highways in Italy, they’re going to run into trouble. Without being heavy-handed, there is a requirement of the funds to look at social opportunities”. Keating also advocated for Superannuation funds to be invested more in corporate debt, alongside the major banks, to support Australian credit markets.

With Superannuation contributions totalling $143 billion (FY21 – ASFA) and increasing, it’s no surprise that the Government views this pool of assets as an area that can assist with its initiatives and fixing deficits in the nation’s budget. The question mark is whether investing in “our national priorities” and “addressing some of our most formidable economic challenges” is also in the best interests of superannuation fund members – which is who Trustees of superannuation funds are ultimately accountable.

Is superannuation’s sole purpose to provide for an individual’s retirement? Or is its role to assist in nation-building and furthering Government policies and initiatives? What happens when a change of Government occurs and the new Government is not aligned with the former’s investment strategy and priorities, and how will that ultimately impact investment returns for super fund members? The Treasurer has said that they are working on a legislated purpose for superannuation – which apparently is not the sole-purpose test.

While there may be worthwhile investment opportunities that arise as a result of these Government initiatives, autonomy in investment decision-making will become a further reason to consider taking ownership of your Superannuation assets.

Sam Eley
Senior Financial Planner
Authorised Representative No. 1234685

If you have any questions or comments, please email me at sam@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution.  The information here is of a generic nature, and does not take into account your investment objectives or financial needs.  No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

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