Morrison urged to accept Murray super plan

With our federal government constantly changing their mind on your superannuation and how you can, or indeed, cannot access it in retirement, now may be the time to explore your options and take control of your super.

Mercer's David Knox says the government must act on financial system inquiry chairman David Murray's call to make default super lump sums a thing of the past.  Ryan Stuart
Treasurer Scott Morrison will deliver the government's formal response to the financial system inquiry led by former Commonwealth Bank boss David Murray on Tuesday, 10 months after the final report was tabled.

Mercer's David Knox, has urged action on the inquiry's call to crackdown on lump sum superannuation payouts and usher in a default private pension system.

The inquiry argued the government should mandate superannuation funds roll their retiring members into a "comprehensive income product for retirement".

These so-called "CIPRs" are an emerging class of financial products designed to provide superannuants with a self-funded income stream to replace or supplement the government-funded age pension.

Mr Murray advocated that this should operate as a "soft default" system, with members able to opt out and chose another product or take a lump sum payout if they preferred.

default" members into a private pension when they retire rather than assume they will take a lump sum.  Chris Pearce
Mercer senior actuary David Knox said a shift away from default lump sums toward default income products was a vital if Australia is to maintain its bragging rights for having one of the top retirement systems in the world.

"Introducing a requirement to ensure that at least a good chunk of superannuation benefits be directed into CIPRs rather than a lump sums is one of the most important steps the government could take to help improve Australia's retirement system," he said.

Australia's international ranking slipping.

The latest Melbourne Mercer Global Pension Index released on Monday evening showed Australia slip from ranking in second place last year into third place in 2015.

Both Denmark and the Netherlands, the two countries to beat Australia's overall score in the 2015 index in first and second place respectively, have strong annuity markets that mean more retirees draw an income stream.

The seventh annual index benchmarks the retirement income systems of 25 countries against 40 performance indicators. It is published by the Australian Centre for Financial Studies in conjunction with Mercer and is funded by the Victorian state government.

Australia's ranking looks set to fall again in 2016, once out-of-date data is updated to reflect the government's decision to push back the increase in the compulsory savings rate to 12 per cent and tighten the assets eligibility test for the age pension, Mr Knox said.

Former Assistant Treasurer Josh Frydenberg had previously flagged the government's intentions in relation to most of the Murray inquiry's eight proposed changes to the super system, but his move to the resources portfolio and the dumping of Joe Hockey as treasurer in the cabinet reshuffle that followed Malcolm Turnbull's ousting of Tony Abbott as prime minister last month means the government's response may contain a few surprises.

Proposed super fund governance reforms are one area where new Assistant Treasurer Kelly O'Dwyer has committed to pushing ahead.

Legislation before the senate would require all super funds to have one-third of board seats filled by independent directors from July 2017, and a majority of independent directors on an "if not why not" basis by July 2019. The shake-up is designed to break equal representation model of industry funds, whereby employer and employee groups each nominate 50 per cent of directors.

Market research commissioned by Industry Super Australia released on Monday showed that only one in five Australians surveyed supported the push to break the equal representation model of industry super funds. More than half of those surveyed were either "on the fence" or "not sure".

The government is also expected to take steps toward stripping the Fair Work Commission of its role in overseeing how default super funds are selected in the modern awards system.

By Sally Rose

Source: afr.com.au