Excessively large and uncapped superannuation balances undermine trust and confidence in the superannuation system and should not be subsidised by taxpayers, but rather capped at a reasonable limit, according to the head of an SMSF actuarial firm.
Lime Actuarial director Greg Einfeld said very large superannuation balances are inconsistent with a taxpayer-subsidised system and it was hard to argue that many people needed high balances to live on in retirement.
“If we are really going to have credibility as an industry, it is important we recognise that nobody needs a balance of $100 million in order to retire,” Einfeld told selfmanagedsuper.
“If somebody thinks they need that much of a balance to retire because they are spending many millions of dollars a year, then the rest of the taxpayers in the country should not be subsidising that spending,” he said.
He said it was hard to argue the superannuation system was designed to provide tax subsidies for people with balances in the tens of millions and the same could be applied to a cap of $5 million, which has been raised in recent discussions around this issue.
“You can apply the same argument there so that may be a reasonable place to set a threshold. In addition to that, the optics of high balances are not good,” he said.
“It reduces trust in the super system when we are trying to promote the benefits of superannuation to the broader community, and ‘battlers’ and people on middle incomes look up and see other people are getting much bigger benefits from the superannuation system when they don’t really need them.”
He added addressing the issue of caps on large balances would be beneficial to the superannuation sector and may also be able to achieve other policy outcomes.
“As long as these types of issues float around, they reduce confidence in the system. The only way people will trust the system is when the rules stop changing, but to get to that point you need to take off the table these elephants that are in the room,” he said.
“What I would like to see is the industry rather than just pushing back on this, using it as an opportunity to negotiate, perhaps with other industry bodies, and to present a united front to the government where we can say we are prepared to support this but we want something in return.
“Non-arm’s-length income and expenditure and legacy pensions are two issues and perhaps there is a trade-off that can be done and we get what we really want in return as well.”
