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Hewison Insights

Politicians – keep your hands out of the super honey pot.

Andrew Hewison
Managing Director
18 May 2022

I raise an eyebrow when any Government allows individuals to place their hand into the superannuation ‘honey pot’ for purposes outside of its sole intention – providing for a person’s retirement.

Over the weekend, in a last ditch attempt to win over the younger voters, the Government announced they would allow first home buyers to access up to $50,000 from their super fund to assist with a home deposit. I am not here to argue for, or against, the policy merits, although if competing bidders each have access to an extra $50,000, won’t that just drive up the property price by another $50,000?

What I will say is this – this policy, along with others from both sides of politics, is short-termism as its very best. It’s a classic case of, buy votes now, and worry about the long-term impact later.

Australia’s superannuation system is the envy of the free world. It’s a form of forced saving and some argue they shouldn’t be told where their money should go. However, it’s debatable as to whether it really was salary to begin with, given the Superannuation Guarantee (SG) was introduced in 1992 as an obligation for employers to contribute to super on behalf of the employee. At the time of it’s introduction, did an employee’s salary decrease to make way for the contribution? The jury is out.

An even more pressing question is with increases to the SG (9% increasing to 12% by 2025), which is an increasing expense for employers, has this and will this be a catalyst of stagnant wage growth?

Superannuation is in place to ensure Australians have something at retirement to fund their needs, and in turn reduce the burden on the Government’s social security system. Any time there is an early withdrawal from super, it’s typically to address a short-term issue, whilst adding to a long-term problem. Of course the government knows their policy is creating a big black funding hole in the future, but their only focus is on re-election.

The question is – What is the point of a superannuation system, funded by businesses, when a government can override the entire process to buy votes?

Hewison Private Wealth manages over 700 SMSFs. Every day we see the difference being (advised) self-funded in retirement, partially or fully, makes to retirees. It’s a darn sight better than the age pension. Employers hold up their end of the bargain, as do super trustees by ensuring they only invest in assets that meet the sole purpose test (for retirement purposes only). So why is super accessible by the Government when it suits them? It’s borderline offensive if you ask me….

Labor’s first home buyer alternative.

For the record, I don’t believe Labor’s proposal to chip in an equity contribution of up to 40% of the purchase price for a new home and up to a maximum of 30 percent of the purchase price for an existing home, is any better. It’s quite possibly worse.

It’s a slippery slope the moment you go into some form of equity partnership with a government. That’s a can of worms I’d rather not open.

**Any financial product advice provided in this is general in nature.  It does not take into account your needs, financial situation or objectives.  Before acting on the advice, you should consider whether it is appropriate to you in light of your needs, financial situation and objectives. Past performance is not a reliable indicator of future performance.