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Funds security an issue for super industry

JUST what does the re-election of the Howard Government mean for the superannuation industry?

Both the Liberal and Labor parties had indicated in the week prior to the election that they were happy with the fundamentals of the current superannuation sys-tem, despite loud calls for a overhaul of the system from some industry and community quarters.

Prime Minister John Howard announced tax cuts for high-income earners and savings incentives for low-income earn-ers, while Opposition leader Kim Beazley foreshadowed tax cuts for superannuation contributions.

What appears certain is that

the Superannuation Guarantee Scheme is here to stay, with both the Government and the financial institutions reliant on the scheme for much of its wealth. Insurance companies and banks have built their business growth plans of acquisitions, mergers, and profit-ability on the extension and maintenance of the compulsory contribution scheme. The Gov-ernment also has become used to the reliable revenue stream coming from the contributions.

So, with the Scheme looking set to remain embedded, the Government has indicated that it would reform within the current system.

The main proposal the Coalition has put forward is one whereby the 15 per cent surcharge on contributions imposed when Mr Howard first won office will be scaled back to 10.5 per cent over three years. The Government raised $577 million in surcharges in 1999-2000.

The scaling back will be one of 13 initiatives the Coalition has proposed to enhance the superannuation system, with implementation not expected till at least a year from now.

Other measures mean splitting of contributions between the main bread earner and the spouse will be allowed while employers will be required to make quarterly contributions.

Regulation of the industry will also be stepped up with additional resources to be allocated to the Australian Prudential Regulation Authority to ensure that it can be more pro-active in its monitoring audit and the enforcement of the superannuation laws.

Speaking at the Association of Superannuation Funds of Australia breakfast last week, Deloitte Touche Tohmatsu partner Richard Rassi, said recent superannuation changes were focusing on greater scrutiny of funds.

Included in a number of recommendations on the table is a requirement for superannuation funds to hold Annual General Meetings.

Mr Rassi was sceptical of what this would achieve.

“It sounds good in theory but I’m not sure what they are going to talk about at the AGM’s, but I guess Mr Hockey is concerned that member’s don’t have the appropriate opportunity to have their say,” Mr Rassi said.

He said the industry had to take the lead in adopting corporate governance measures rather than wait for Government regulation.

The ASFA labelled the Coalition plans as dealing mainly with people at the margins.

CPA Australia agreed with this assertion.

“The proposal to wind back the superannuation surcharge does not address the significant costs associated with administering the surcharge, CPA Australia’s Superannuation Centre of Excellence chair Murray Wyatt said.

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