Consultancy firm KPMG has thrown into question the legality of the Turnbull government’s budget measure to allow first home buyers to use superannuation to save for a deposit.
In its Super Insights Report, released on Wednesday, KPMG said the policy, which would allow home savers to salary sacrifice up to $15,000 a year into their existing super fund, was “difficult to reconcile” with the government’s own definition of the purpose of superannuation.
“Arguably, policies to address housing affordability do not fit comfortably within their proposed primary subsidiary objectives of superannuation.”
The Turnbull government introduced draft legislation in 2016 stating that the purpose of super was to substitute or supplement the age pension. It is yet to pass Parliament.
Labor has also seized on the issue, with Shadow Financial Services Minister Katy Gallagher branding the measure “inconsistent” with the proposed definition.
The KPMG report also called for a national debate to determine whether super should be able to be passed on through wills and whether it should be directed for national purposes like infrastructure.
The report found that industry super funds have caught up with their retail competitors, creating an even split between the two at the top end of Australia’s super system.
But while large funds are getting larger, there are still too many smaller funds which need to be consolidated, according to KPMG.
The report also found that the 9.5 per cent super guarantee (SG) needed to be lifted as it is not sufficient to provide the 65 per cent of working income considered adequate for retirement.
“The 9.5 per cent is a good starting point but you need to keep building,” KPMG actuarial partner Michael Dermody said.
However the planned increases in the SG to 12 per cent from 2025 will help provide adequate retirements.
“KPMG has calculated that a person on average earnings who starts their career after 2006 and works for 40 years will retire with a superannuation balance of more than $545,000,” he said.
“That is the level estimated to be needed for what the Association of Super Funds Australia has defined as a ‘comfortable’ standard of retirement living.”
The industry fund sector has been growing faster than the retail funds over the past decade and this is now almost on a par with its main competitor. When the other not-for-profit fund types, public sector and corporate, are added in they easily outstrip their for-profit competitors.
However self-managed super funds have also been a major growth area over the period and now have more assets under management than either retail or industry funds. The not-for-profit sector collectively still outstrips the SMSF sector however.
However, the member profile of fund types varies quite dramatically. Industry funds have a much younger profile resulting in much lower withdrawals and higher levels of net contributions.
The industry funds also appear to have lower-income members with the vast majority of contributions coming from employers under the SG. For the retail funds, however, more than one-third of contributions come from members themselves.
The net inflow of industry funds of $19 billion yearly is over 40 per cent larger than the $12 billion reported by retail funds.
The gender divide remains an ongoing concern in superannuation with women in the 45 to 64 cohorts holding significantly less in their super accounts than men. The differential is driven by the gender wage gap and women’s disrupted career patterns as a result of caring responsibilities for children and the aged.
The workforce is still very gender segmented with building industry funds, Cbus and BUSSQ, reporting 92 per cent and 94.2 per cent male members. Meanwhile, health industry fund HESTA and pharmacists fund Guild Super report 80.7 per cent and 86.4 per cent female members, respectively.
KPMG wealth management partner Manish Prasad told The New Daily: “There is a shift to more equal positions between the retail, industry and public sector funds.
“Account numbers are flattening out with the industry rationalising, the introduction of [the ATO’s] Super Stream and the government’s lost account portal starting to work.”