What I would change about super

A superannuation reform wish list skips tax rates and focuses on plain look-through disclosure, simpler forms and contribution rules, easier balance switching for couples, and a stable rulebook that members can trust and plan around.

A question I keep coming back to, and one I chewed over on the Australian Retirement Podcast, is what I would actually change about superannuation if someone handed me the pen. 

What struck me afterwards was that almost nothing on my list was about lifting or cutting a tax rate. The changes I kept returning to were about three things, whether people can see inside their super, whether they can use it without a headache, and whether they can trust that the rules will still be there next year.

Transparency, because every client asks the same question

Before anyone signs up with us, they ask a version of the same question, which is what do I actually own. 

How much of Commonwealth Bank sits inside my balanced option, how much of my retirement is invested in an office tower like 101 Collins Street in Melbourne, and how much is simply in cash earning very little.

It is an entirely reasonable thing to want to know, and yet most super funds are under no real obligation to answer it in a form an ordinary member can use. The look-through disclosure that does exist tends to arrive as a long, dated spreadsheet that almost nobody can decode, which is not the same thing as transparency.

What I would mandate is genuine, plain look-through, so that a member can see the actual investment breakdown of their option down to the real holdings, with consistent product labelling and an honest statement of asset allocation rather than a marketing category.

Regulators are finally covering some of this ground, pushing on consistent labelling, discount rates and asset-allocation disclosure, but they are dragging it out of the industry rather than the industry offering it freely, and the standard should simply be that if an adviser would show a client it before they invested, a member has the right to see it afterwards.

Simplification, because the forms alone drive people away

If you have ever tried to move super, start a pension or make a withdrawal, you will know that each of those actions comes with its own form, its own rules and its own quirks, when there is no good reason they cannot be consistent.

Making every form the same, so that a withdrawal, a rollover and a pension commencement follow one familiar structure, would remove a surprising amount of the friction that stops people acting on decisions they have already made.

The contribution rules are the other place where complexity does real harm. I would remove the work test that applies between 67 and 75, because it makes no sense that you can make a non-concessional contribution without working a single hour, yet cannot claim a deduction on a personal contribution unless you first pass a work test, particularly at a time when we have been willing to lift the capital gains tax rate but not to make it easier for people to reduce their tax by saving.

I would go further and ask whether we need annual caps at all, or whether a lifetime limit of the kind we have used before would be fairer, so that someone who can contribute earlier is not quietly penalised by the calendar once they have reached their limit.

I would also make it far easier for couples to even up their balances during their lives, rather than only when a marriage ends and family law forces the issue. Allowing genuine balance switching between spouses well before retirement would let couples make full use of each partner’s own tax-free retirement limits. It would deal with equalisation early, calmly and by choice, instead of leaving couples to sort it out under pressure at the very end.

Trust, because constant change is its own tax

The deepest problem, is that super changes too often. Every change, even a well-intentioned one, costs a little confidence, and confidence is precisely what persuades people to put money in when they are not compelled to.

The consumer sentiment surveys tell the same story, that people make voluntary, discretionary contributions when they believe the rules will hold, and they sit on their hands when they suspect the goalposts are about to move again, so if I could impose one discipline on Canberra it would be to leave the system alone for long stretches and let people plan around a settled set of rules.

Part of the trust problem is also structural, because the system defaults most of us into a fund at the start of our working lives and we never leave, which allows funds to be a little lazy in a way that genuine competition would never permit.

A system built on inertia has to work much harder to earn the confidence it quietly assumes it already has, and the fix is not another rule change so much as giving members a real reason, and the real information, to pay attention to where their money sits.

The thread through all of it is that I did not spend my time arguing about how much tax super should attract or where the caps should sit, but about whether a retiree can understand the system, use it without frustration, and rely on it to stay still long enough to plan around, because a fund you can actually see inside and a set of rules you can trust to hold are worth more to most people than another well-intentioned tweak to the rate.