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Challenges abound as super poises for COVID-19 recovery

Leaders from the nation's industry super funds have called for greater certainty around superannuation policy, noting various challenges face the industry in the period of economic recovery ahead.

In particular, industry fund chief executives pushed for the now legislated increase to the super guarantee (SG) to continue full steam ahead, despite pressure from a coalition of backbenchers to freeze or dump the increase in SG to 12%.

During a QIC media roundtable, Cbus chief executive David Atkin argued that the scheduled increase would both benefit individual members as well as the economy.

"Notwithstanding the commentary that has come out from those backbenchers... [the increase to the SG has been] legislated, and therefore it is known that these increases will be coming in a scheduled way," he said.

"Frankly, given the buffeting the system has gone through, and the fact that we have seen so much money withdrawn from the system and members savings, we are going to need that increase to recover some of the lost super and lost lifestyle that will come from people accessing their super early."

Similarly, Hostplus chief executive David Elia slammed questions that the SG increase would come out of Australian wages.

"I don't think that is factually true," he said.

"I haven't seen any evidence that statements on these trade-offs are real"

He noted that over the course of the last five years there hasn't been any real lift in wages, while productivity has lifted approximately 1.1% per annum.

The lift to the SG "is the only increase that people are really going to get," Elia said.

QIC chief executive Damien Frawley agrees, arguing any steps to move away from the SG increase would only create issues for the government.

"The system is working perfectly well and has worked perfectly well for a long time," he said.

"It is also taking away a lot of pressure from government balance sheets. Moving away from the super system today and making any move to wind it back will only create issues down the road for government P&L."

Further clarity over superannuation policy would allow super funds to better invest in the economic recovery to create risk adjusted returns for members and generate employment, Atkin said.

"For every dollar that is invested back into the building industry, it generates three more jobs in the industry," he said.

"So the SG increase is important to continue with, because it has a benefit to the individual in terms of a retirement outcome perspective, but it will also benefit the economy."

Elia agreed, arguing the industry needed greater certainty to take advantage of investment opportunities in the COVID-19 recovery.

"COVID-19 has thrown out various challenges for us," Elia said.

"Really we need clarity on the purpose and role of super, and we don't have bipartisan support on that.

"Super funds need some element of certainty... from a regulatory perspective; certainty around superannuation policy is required to allow us to invest long term."

Although he noted that the fund had plentiful liquidity, Elia argued that Hostplus, as well as its peers, would not be able to invest heavily in unlisted assets, such as infrastructure and commercial developments, thanks to the government's early release scheme.

"We will continue to make allocations to the unlisted sector, but our ability to do more will be somewhat constrained," he said.

"The early release scheme forces us to hold a lot of cash, to be much more liquid than we would presume to be or need to be."

Other challenges noted by the panelists include a "second wave" of early release redemptions, a further widening of the retirement gender gap, a lack of bipartisan support over the true purpose of superannuation, as well as a push towards investing for the world of the future (or a green-led recovery from the COVID-19 crisis).

Of note, Frawley argued that the super system may be facing fresh risks as it dives into a recession.

"The other [issue] that we are going to have to contend with as we get into this recession is early retirement and forced redundancy which might give rise to people leaving the system at the other end," he said.

With 6000 people already set to leave Qantas, and other industries expected to follow suit, Frawley argued super fund trustees needed to rethink how they manage portfolios to accommodate people who are forced to retire early.

"Both sides of the industry have matured a lot over the last couple of years; I am hopeful and I am pretty positive that the people who sit on top of these organisations are there to benefit the member, whether we sit on the industry side or the bank sponsored side," he said.

"So I am hopeful that times like pandemics, times like share market crashes... [will] galvanise people together."

Read more: SGHostplusQICDamien FrawleyDavid AtkinDavid EliaQantasSuper guarantee
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