Super news for August 2024

Super organisations demand reform to stop domestic abusers accessing their victim’s super

The Super Members Council, the Association of Superannuation Funds of Australia and Women in Super are calling on the Australian Government to reform super death benefit laws to stop perpetrators of family violence being able to claim their victim’s super.

Under existing laws, an abuser can receive a victim’s super death benefit unless they are the direct cause of that person’s death. Even if the perpetrator has been convicted of family violence offences, or if systemic abuse indirectly contributed to the cause of the victim’s death, they are still able to receive the benefits.

The three associations wrote to key federal ministers asking to expand the Forfeiture Rule to family violence-related crimes and investigate legislative reforms that would allow super funds to withhold death benefits in substantiated cases of family violence.

“Perpetrators should not profit from their crimes. It’s time to close this legal loophole to protect victims of family violence and financial abuse,” Super Members Council CEO Misha Schubert said.

“The proposed reforms are not just about preventing financial gain for perpetrators; they are about sending a clear message that Australia will not tolerate abuse in any form,” Women in Super CEO Jo Kowalczyk said.

Choosing how and when to retire aids wellbeing

People who chose to retire, rather than being forced to retire out of necessity, have significantly fewer worries (51%) and adjust better to being retired (44%), according to a study by the Macquarie University’s School of Psychological Sciences of 1000 Challenger customers aged over 60.

Only 32% of those who were forced to retire said they had significantly fewer worries and just 28% said they adjusted well to being retired.

“Proactively choosing how and when to retire may be the secret ingredient to wellbeing in our golden years,” lead researcher Professor Joanne Earl said.

“The findings demonstrate that feeling empowered to choose when and how you step into this next phase of life results in a healthier transition and greater retirement happiness, retirement adjustment and satisfaction.”

When compared to Challenger’s Retirement Happiness Index Research, retirees with a guaranteed income stream were found to be happier and more positive, with higher levels of financial security (72% v 56%), mental health (85% v 78%) and enjoying good social connections (79% v 70%).

“For the first time, we are hearing from real customers about the power of guaranteed regular income. The data clearly indicates that annuities, or some element of guaranteed regular income in retirement, can be a gamechanger, and we are seeing this in our broader customer base and increase in annuity take-up,” Challenger chief executive, customer, Mandy Mannix, said.

Time to rethink the role of the family home in retirement planning

Enabling more Australians to access the equity in their homes may enable them to enjoy a better retirement income, according to a Dialogue Paper from the Actuaries Institute called, More Than Just a Roof: Changing the Narrative on the Role of the Home.

“While most retirees own their own home, 60% retire with less than $250,000 in their super. As a result, they’re often living more frugally than they need to. But this doesn’t need to be the case,” says paper author and actuary Andrew Boal.

The Institute’s Retirement Strategy Group Chair and Partner in Deloitte’s Superannuation & Investment Practice says the boom in residential property prices has resulted in many retirees who own their own home being stuck in an asset-rich, income-poor trap. More than 80% of Australians aged 65 to 74 live in their own home, with retirees holding an estimated $1.3 trillion worth of housing equity.

“If retirees accessed 20% of the $1.3 trillion they hold in home equity, it would unlock about $260 billion to help fund what could be 25 to 30 years or more in retirement,” Mr Boal said.

The paper puts forward a number of suggestions to address the financial disincentives to access part of the wealth stored in the home. These include removing or refunding some of the frictional costs associated with downsizing and changing the means test treatment of the proceeds from sale. It also recommends reducing incentives to store wealth in the home, such as gradually including the value of the home above a reasonable threshold into the Age Pension means test.

ASFA calls for more Low-Income Superannuation Tax Offset (LISTO) support

The Association of Superannuation Funds of Australia (ASFA) is calling for the Low-Income Superannuation Tax Offset (LISTO) threshold to be raised from $37,000 to $45,000.

ASFA suggests the government could ring-fence $750 million of the forecast revenue from its proposed tax increase on super earnings for balances over $3 million (Division 296) then use this to increase the LISTO threshold and the maximum LISTO payment from $500 to $700.

“By increasing support for low-income earners and ensuring fair tax contributions from those with substantial superannuation balances, we can foster a more balanced and equitable retirement system,” ASFA chief executive officer Mary Delahunty says.

ASFA says this change would benefit an additional 1.2 million Australians, mostly women, young workers and workers from a non-English speaking background.

“Division 296 and Division 293 aren’t just measures aimed at removing tax concessions for those with high super balances – it’s an opportunity to make society fairer and provide low-income workers with a more dignified and secure retirement,” Delahunty said.

Mercer Super to pay $11.3 million in greenwashing case

Mercer Superannuation (Australia) Limited has been ordered to pay an $11.3 million penalty by the Federal Court after it admitted it made misleading statements about the sustainable nature and characteristics of some of its super investment options.

“This was ASIC’s first greenwashing case brought before the Federal Court; a landmark case both for ASIC and for the financial services industry. It demonstrates the importance of making accurate ESG claims to investors and potential investors,” the Australian Securities and Investments Commission deputy chair Sarah Court said.

The Court found members who took up the Sustainable Plus investment options offered by the Mercer Super Trust, of which Mercer is the trustee, had investments in companies involved in industries the website statements said were excluded, including 15 companies involved in the extraction or sale of carbon-intensive fossil fuels, 15 companies involved in the production of alcohol and 19 companies involved in gambling.

“The contraventions admitted by Mercer are serious. They arose from failures by Mercer to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions associated with such ESG claims,” Justice Horan said when handing down his decision.

Early super access could boost property prices

Research by the Super Members Council has found allowing super to be used for house deposits could cause a 9% increase in the median property price.

The analysis shows that if the price rises are fully passed through, median rents could increase by almost $3,000 a year – or about $57 a week.

A typical couple who accesses up to the $50,000 suggested limit to buy a home would also have significantly less in disposable income after housing costs over their lifetimes. 

“A couple withdrawing their super early for a house deposit is projected to be $165,000 worse off over their lives,” Super Members Council chief executive officer Misha Schubert said.

“That’s because rents, mortgage repayments, stamp duties and rates would all rise – and people would lose a mountain of money from their super at retirement… It would make life harder financially for young Australians – especially those renting – and make cost-of-living pressures worse.”