The battle over retirees’ superannuation entitlements has just stepped up a gear with Brad Cooper, the chief executive of BT Financial Group, calling for retirees who are earning more than $150,000 per annum from their superannuation to start paying income tax.
Fairfax reports this morning that Cooper will throw down the gauntlet for this change, and the return of concessions for low income earners and women, in a speech today to the Trans-Tasman Business Circle in Sydney.
Even though Cooper’s idea would be a big divergence from current practice, $150,000 still sounds like an inordinately large number before retirees start paying tax. But Cooper’s rationale is that it’s often one person’s super covering the household.
“Therefore, in retirement, if a person has a balance high enough to draw an income stream that is twice (average earnings) then I believe this is the point that taxpayer-funded concessions should fall away,” he will say in the speech.
Cooper believes that tax breaks should not be unlimited and says the “guiding principle should be that tax concessions remain in place as long as they are being used to build savings that generate an income in retirement that affords a decent quality of life”.
This sentiment, the savings Cooper is suggesting, and the realignment of benefits towards less wealthy Australians, is earth-shattering enough for an industry built on accumulation and assets under management.
But perhaps his most important contribution to the debate about Australia’s retirement future comes from his agreement with Social Services Minister Scott Morrison challenging the notion that retirement savings are a lump sum to be preserved and passed on to the kids rather than spent in retirement.
Back in May, Morrison said “the purpose of providing tax incentives to encourage people to build up their super is so they can draw down on it in their retirement, not maintain it as a capital pool to be passed on as an inheritance”.
“Super is meant to be used to generate replacement income in retirement. Beyond this, I do not think it’s appropriate for people to use its tax-free status to build incredibly high levels of wealth or serve as a proxy estate planning tool.”
Cooper believes that a lifecycle approach to superannuation should be taken with three distinct phases and plans. Those phases would include the accumulation phases of saving for retirement, the active retirement phase and then a third phase once retirees reach average life expectancy.
That such a senior industry leader feels the need to publicly call for an overhaul of his industry tells you just how stuck policy has become.
You can read the full story here.