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Brexit requires super rethink by govt

The SMSF Owners’ Alliance, together with the Australian Shareholders’ Association, Australian Investors Association, Small Self-managed Superannuation Funds Association and Save Our Super, have cautioned that the economic uncertainty caused by the Brexit vote should prompt the government to reconsider its superannuation tax policy should it be re-elected on Saturday.

“The retirement savings of Australians are now vulnerable to the buffeting they will receive as the global economy adjusts to Brexit,” the bodies said in a joint statement.

“Superannuation fund investment strategies and expected returns on fund assets are now much more uncertain.

“The share market will be more volatile, interest rates may stay lower for longer and investment values will be affected by variations in exchange rates and trade flows.

“In these circumstances, new taxes and new limits on superannuation savings will diminish the capacity of super funds to deliver dependable and adequate returns to their members in line with their investment strategy and anticipated retirement income.”

Furthermore, the super funds to which most Australians entrusted their retirement savings were not protected against economic turbulence, whether they were self-managed or run by professional fund managers, they said.

“They are exposed to investment risk, including the loss of capital, and longevity risk,” the bodies said.

“In contrast, the defined benefit funds that politicians and public servants enjoy are guaranteed for life by government at the cost of taxpayers and are immune from adverse economic conditions.

“In the current circumstances, it would be unfair and unwise for the government to proceed with its superannuation tax plans.

“Politicians should not expose the retirement savings of others to risks they do not bear themselves – they should not be imposing new structural changes on super when the investment climate is so uncertain.”

If elected, the coalition should immediately put its super tax plans on hold until the consequences of Brexit became clearer, the bodies said.

That was consistent with Prime Minister Malcolm Turnbull’s message at his campaign launch yesterday that in the wake of Brexit, Australia needed stability in economic policy.

The bodies said if elected, the government should also review the unfair impact of its super changes on people who had invested in super under the rules and now found their retirement savings were to be taxed.

The government should grandfather the rules that applied prior to the budget on 3 May, they said.

Further, the government should review the numbers that underpinned its policy, the bodies urged.

“We have shown through analysis by Dr Ron Bewley, former professor of econometrics and head of the School of Economics at the University of New South Wales, that the numbers on which the government justifies its policy do not add up,” they said.

“A fund of $1.6 million is not enough to last all of retirement for all people – to do that, it would need to be twice as large, $3.2 million.

“Nor will a fund of $1.6 million deliver four times the age pension, nor an income equivalent to $100,000 from a defined benefit fund, as the government has claimed.

“The numbers on which the government justifies its superannuation changes do not stack up and should be independently audited.”

In addition to hitting the pause button on its super tax policy, the government should engage in genuine consultation with super investor groups, the SMSF Owners’ Alliance said.

“So far, it has fallen short of proper consultation,” it said.

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