Increased Superannuation Contributions could cripple Our Kids financially in the short term

I just read a column in the Australian newspaper where it says the Government is considering increasing the compulsory superannuation contribution to 12% or even 15%.

Nick Sherry Minister the “Super Minister” is not sold on the idea fully yet but I think he has it under consideration.

There are major problems with the current compulsory super system not least of which is the stated annual $860 Million paid to the wealth industry in fees just for taking 9% of our money by government decree. This in itself is criminal and makes a large dent in the end retirement amount over 40 or so years.

If the wealth managers lobbying hard in the corridors of Parliament House Canberra get their way and the compulsory contribution is increased to 15% that will increase their “take” of our kids annual contribution to $1.433 Billion. That is effectively a 40% pay rise for doing no more work. Does that seem fair to you?

This simplistic approach to saving for a retirement so far away for our kids is ridiculous because it is not related to the reality our kids face such as:

  • Saving for a deposit for a house (It just got a lot harder)
  • Paying off a mortgage (Might have to sell the wife and kids to do it now)
  • Providing for their family (Can we leave them some disposable income please?)

I suspect many of our kids do not relate to their superannuation, I know mine don’t. It is made worse by the poor efforts by wealth managers to fully inform and involve them in it. Just take a look at the silly end-of-year reports some of them bother to send out that give hardly any details about the super except for the end-of-year total. Most of our kids just throw that report in the garbage because that is what it is.

Life is not about static events. A lot can happen in 40 years. Everything is dynamic and the government needs to be thinking outside the box. It’s a known fact that if our kids can get into the housing market and hang on, then they should be able to capitalise on that investment over the long term. A house gives them a goal and a focus. A house is real, they can see, feel and touch it.

Perhaps being able to buy a house within the super fund account will help use that money much more efficiently for the benefit of our kids and not the wealth manager. It might also help protect it from being foreclosed on. That would make banks much more responsible with their loans.

It’s just a thought and its by thinking up lots of ideas independent of the wealth industry lobbyists that we might create something really worth while.

Our kids cannot relate and never will to the government forcing them to give 9% or 15% of their money to someone they do not know and who definitely doesn’t care for them. It’s just another tax at that time in their lives. Time is not important at that age – they are going to live forever, don’t you know. So there is plenty of time.

Trusting any stranger with your hard earned money for 40 years is a recipe for disaster if you ask me, especially if proper accounting principles are not adhered to for each persons account with full transactions available at any time. It’s open to graft and corruption at worst and increasing fees and charges at best. We change governments every 2 to 4 years for this very reason don’t we?

These things should be part of any review and with computer technology software today this should be easy to do. Considering my own experience with one of the largest Australian Wealth managers woeful “dark-ages” WRAP Account software, this would not be hard to do and would most likely reduce the cost of managing our kids retirement funds over 40 years. Isn’t that what computerization is supposed to do, make things more efficient and therefore cheaper?

What makes matters worse is some of that $860M paid out as fees is probably paying off the mortgages of the wealth managers so they can get ahead. Whilst our kids can’t even save for a deposit because 15% of their money will be locked away for someday too far away!

Dynamic super contributions should be considered that allow our kids to use most of their money in the early years to invest in their own home, career or pay off that damn university education. Then as they get older they should get tax incentives to put more of their income into superannuation when they are earning more and paying more taxes too, and have a better grip on their lives.

What the government will do by grabbing 15% is make the wealth managers even richer and leave our kids cash poor just when they need the cash the most. A 15% super contribution taken from their salary in their 20’s is “serious money” at that age and nothing more than a tax to them I am sure.

Another thing that should be considered is portability of super accounts. We should be able to transfer a super account like we do our telephone numbers. This would put Wealth managers on notice that if they don’t perform on returns, fees and losses then it should cost very minimal dollars to move to another wealth manger.

It is possible to design software programs that can do this and laws can be made to make it possible too. It just needs the government to have the will and the back-bone to seriously want to protect our kids super funds and not the wealth managers’ wallets. Don’t they have kids too?

How does all this affect Baby Boomers in Retirement you may well ask? If it doesn’t happen you can bet that it will be us Baby Boomers that will be bailing out our kids to help them get ahead. The sad thing is history will repeat itself and their nest egg will also have been eaten by the wealth management industry when they need it in ………….. 40 years time – unless we act now to change the system.

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