Final Report: Detailed Analysis
A2. Retirement incomes
The government should help make people more aware of the retirement income system, and therefore better able to manage their superannuation, by increasing the regularity of superannuation guarantee contributions, making it easier for people to manage their superannuation and providing people with a single point of contact for government agencies.
- Superannuation guarantee contributions should be paid at the same time as wages. This should be introduced over time so businesses can adjust their cash flows. As a first step, larger businesses (that is, businesses required to lodge their business activity statements on a monthly basis) should be required to pay superannuation guarantee contributions at least monthly.
- Employers should report superannuation contributions to their employees when a contribution is made.
- There should be a method of linking superannuation records, such as client identifiers like the tax file number, to make it easier for people to manage their superannuation.
- A superannuation portal where people can interact with government agencies and get information on retirement incomes should be developed. Over time this portal should evolve, subject to suitable safeguards, so that people can manage all their superannuation through one channel.
People should be able to engage with the superannuation system and manage their superannuation as easily as possible. In order to do so, they need to be aware of how the retirement income system works with their money. The system should take into account that superannuation contributions are part of an employee's remuneration and people should be able to manage their superannuation in an efficient manner.
People should be able to interact easily with the government agencies that administer the retirement income system.
A person's level of awareness of the retirement income system will affect the outcomes they get from it. While it is difficult to make people take a greater interest in the system there would be benefits in making it easier for people to become more engaged with their superannuation.
Measures to increase engagement include: increasing the regularity of superannuation guarantee contributions; creating a more effective means for people to prove their identity to superannuation funds; and introducing a single superannuation portal that people can use to manage their relationship with government agencies.
The relationship between members and superannuation funds is also important for increasing awareness and engagement. This relationship forms part of the Review into the governance, efficiency and structure and operation of Australia's superannuation system being undertaken by Mr Jeremy Cooper (the Cooper Review).
There are certain aspects of the retirement income system that can hinder people from becoming more engaged with it. These include government regulations that provide for:
- superannuation guarantee contributions to be paid separately from wages; and
- complex identification requirements for people with multiple accounts that can make it difficult for people to manage their superannuation.
The relationship between individuals and superannuation funds is outside the scope of this Review and falls within the scope of the Cooper Review.
Superannuation guarantee contributions are part of an employee's remuneration but, unlike wages, they are only required to be paid once every three months. This may make it difficult for people to see that superannuation is part of their wage. In addition, many employers are not required to advise their employees that they have made a superannuation contribution on their behalf.
Superannuation guarantee contributions should be made at the same time as an employee is paid their wage. The growth of electronic commerce since the introduction of the superannuation guarantee in 1992 has made it easier for employers to make more regular contributions. However, this requirement should be phased in over time to give smaller businesses time to adjust their cash flows.
As a first step, larger business could be required to make superannuation guarantee contributions at least monthly. A business could be regarded as a large business if it is required to lodge its business activity statement on a monthly basis. This could also form part of a future extension of the standard business reporting protocols (see Section G4 Client experience of the tax and transfer system). Like other remuneration, employers should be required to advise their employees when a contribution is made.
Although people cannot access their superannuation until they retire, it should be easier for them to manage it while it accumulates. Advances in technology will assist in this process. However, electronic management of superannuation accounts will depend on the person being able to prove they are the owner of that account. The government should implement a mandatory identifier for superannuation (possibly including the existing tax file number). This would also act as proof of identity, making it easier for people to manage their superannuation, to merge multiple accounts into one account and to open new accounts. It would also assist in reducing the number of lost superannuation accounts.
Access to information is another way of improving engagement with the system. As a trusted source of information for the community, the government should establish a superannuation portal. The portal would provide a single point where people could access information from, and interact with, relevant government agencies on retirement income matters, including the Age Pension. It would also provide access to general retirement information, such as that already available on the FIDO website administered by ASIC and the National Information Centre on Retirement Investments.
Over time, this portal could evolve to provide more specific information relating to a person's superannuation accounts. This could allow a person to view all their accounts in one place, open and close accounts and move money between funds. These capabilities would depend on the introduction of a mandatory electronic signature or identifier to provide a link between accounts.
It would be important, however, to ensure that if a government portal is used to access private superannuation accounts, appropriate means are employed to ensure that account holders are aware that superannuation is not a government product, is not guaranteed by the government and is not otherwise endorsed by the government.
There would be adjustment issues for both employers and the superannuation industry as a result of these recommendations. These would include updating software and other administration systems. Therefore, the recommendations should be further developed in consultation with employers and the superannuation industry.
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