NSW Liberal Senator Andrew Bragg wants to use a new Senate inquiry into the retirement system to help fashion the strategy on superannuation and housing which the Coalition will take to the next election, which will occur in or before 2025.
The Coalition has recommitted to the policy it took to the last election – allowing first home buyers to access up to $50,000 from their super to buy their first home. Shadow Treasurer Angus Taylor told a Conexus Financial Political Series event earlier this year the controversial scheme would a centrepiece of its pitch to to the public for a change in government.
But in an interview with Investment Magazine, Bragg says he is keen to look at other ideas of how super could be used to help people own their own home.
Bragg, a former policy manager with the Financial Services Council with a longstanding interest in superannuation, says the Coalition sees the housing shortage issue as one of the key themes of the next election.
While he says superannuation is not going to be a “silver bullet” to solve the housing crisis, he is looking at other ideas to tap into super, in addition to the current policy on first-home buyers.
“I’m very pleased that the Senate has decided to commission this inquiry because superannuation is one of the biggest interventions in the lives of Australians,” he says. “We need to make sure that it is actually going to work, and is actually going to promote a secure retirement.
“Home ownership is the most important determinant of security in retirement. That’s why we are putting home ownership at the centre of this inquiry.”
“What I hope to achieve is to test all the various options for getting to the most secure retirement which – I say – involves home ownership.”
‘Open to suggestion’
Bragg says he wants the inquiry to look at a range of other policy options for using super to help people buy their own homes. While the current Coalition policy is looking at ways to help first-home buyers, Bragg says this could be expanded to help a broader range of people.
He says this could involve allowing more people to access super to fund their housing or somehow using money in super as collateral.
“Super can play a role for first home buyers, but it can also play a role for people who already have a home and a mortgage,” he says.
Bragg says that he is open to suggestions that money could be kept inside of super but still used in some way to help people own their own homes.
“I’m not going to be bloody minded about it. One option is that you could take $100,000 out of super to buy your first home. In Sydney an average deposit on a home is now $150,000.”
“Another option is to leave the money in the super system so it could be used as collateral for the deposit on a home.”
The inquiry is due to report by 30 June next year, a timing that would allow its findings to play into policies for the election.
Bragg’s comments make it clear that Labor and the Coalition now have two very different approaches to superannuation.
Labor – the party which established the compulsory superannuation system more than 30 years ago – is arguing that preservation is one of the key pillars of the compulsory system, with tax concessions being the trade-off for people having to tie up their savings until retirement.
But the Coalition, which paved the way for super to be used for other purposes when it allowed people to draw down up to $20,000 from their super during the pandemic, is now seeing super as potential financing for other policy issues, particularly housing.
Bragg says this is now a key policy difference between the two parties.
The government, he says, wants to “hermetically seal” the money in super funds until retirement.
“That’s the difference between us and Labor,” he says. “Just because Labor believes that every last dollar of superannuation should be hermetically sealed in the system, doesn’t mean it’s the right approach for the country.
“It’s got to work in the best way for the people, not for the funds.
“We are wanting to run the country for the benefit of the people and not the super funds,” he says.
“The next election will be the housing election. There is a serious debate about how we generate more housing supply, but there is also a key debate on how we use super.”
“It’s going to be an important part of our offering at the next election because we know how acute the housing problem is, particularly for young people.”
“If superannuation is the biggest pool of capital that someone under the age of 40 has, then the way it is regulated in relation to housing is going to be critical in the next election.”
Power to consumers
Bragg says the fact that super funds are now discussing investments in affordable housing is not the solution.
“I don’t want super funds owning housing, we want people to be able to own their own homes.”
Senator Bragg successfully moved for the Senate to back the inquiry which he has been trying to get off the ground for some time.
The inquiry will look at ways to “improve consumer experiences, choice and outcomes in Australia’s retirement system.”
This will include the regulatory and tax impediments to innovation and the take up insurance products in retirement, the interaction of health insurance, life insurance, general insurance and the social security system, and policy options to support a greater quality of life in retirement including around the age pension, financial advice, home ownership and downsizing.
Bragg says the inquiry will look at issues around group insurance and superannuation which has been the subject of an increasing number of complaints by super fund members.
“We will look at the efficacy of group insurance and the appropriateness of the conduct of that sector,” he says.
Bragg said it was the increasing media coverage of complaints against super funds, particularly around insurance issues, which was instrumental in getting the Senate to back the idea of an inquiry when he proposed it this time around.
Bragg says the inquiry will also look at whether insurance can be used to help fund the cost of aged care.
The senator, who has been outspoken in his criticism of what he sees as the ties between the industry super funds sector, the unions, and the Labor Party, says now is not the time for an ideological debate on whether Australia should have a compulsory superannuation system or not.
“I don’t think the Australian people are particularly interested in people’s ideologies, they are interested in how we can solve this housing problem right now.”
Senator Bragg says he would like the Australian Prudential Regulation Authority (APRA) to be tougher in enforcing the requirements around the disclosures of super fund spending and whether money paid to unions and industry associations is in the best financial interest of members.
Bragg and others were instrumental in heading off a move by Financial Services Minister Stephen Jones in the Senate last year to disallow some of the regulations introduced under the previous Coalition government about super funds disclosures.
He says that there are now quite a lot more disclosures contained in super fund annual reports which should be studied more closely by members and others.
“It’s good that we have these disclosure requirements, but is APRA enforcing the best financial interests duty as forcefully as it should do in relation to these political expenditure matters, and in relation to the running of The New Daily website at the moment?
“I don’t think so. We’ll keep pursuing this in Senate estimates.”
“My general view is that ASIC is a very weak regulator. APRA is generally a good regulator, but it needs to be much stronger in the enforcement of the best financial interests duty.”
No offence to super funds, though
Bragg says he is not critical of the super funds themselves on their position on holdings disclosure.
“My concerns are political – that the Labor Party is run by the super funds and the unions, where you can have someone like Wayne Swan as the president of the ALP and the head [chair] of one of the big super funds [Cbus].”
“The government is acting in the interests of their favourite vested interests and not the interests of the people.
“This is not a criticism of the super funds – they are just trying to grasp as much as they can from a favourable government.”
At the same time, Bragg says he believes that super funds should take into account climate change risk in their operations. That comes despite widespread opposition to ESG investing movements from some conservative parties and politicians around the world.
“The economy is decarbonising, and it is definitely in the best interests of members of super funds for the fund to take into account environmental risk.”
“As long as they are doing it in a sensible way and not becoming political, it is in line with their legal obligations.
“Environmental risk is the same as any other financial risk and it needs to be factored into the portfolio construction process.
“That is what responsible trustees should do.”