Sydney, 10 August, 2006: The Australian Bankers’ Association (ABA) said the proposed changes to the superannuation system should improve adequacy of retirement incomes, reduce complexity, foster competition across the financial services industry and increase flexibility so that Australians can choose savings and investment products that meet their changing needs.

The ABA has provided its comments in a submission on the Federal Government’s ‘A Plan to Simplify and Streamline Superannuation’, which was announced by the Treasurer, Mr Peter Costello, on 9 May, 2006.

The ABA is broadly supportive of the Federal Government’s superannuation reform package. The reforms are designed to simplify the superannuation system, encourage confidence in Australia’s retirement incomes policy and to increase the level of superannuation and private savings.

David Bell, Chief Executive of the ABA, said: “The current superannuation system is very complex and confusing for consumers. It also places heavy administration burdens and compliance costs on providers, which leads to unnecessary costs for every consumer. Reducing complexity, minimising administration burdens and compliance costs should be a continuing goal for these and any future changes.”

“There is a real opportunity to simplify the rules and thereby increase consumer understanding so that retirees are more able to take control of their superannuation and retirement income decisions.”

While superannuation has encouraged some saving due to its compulsory nature and tax treatment, Australia has a low level of private savings compared to other countries. One of the reasons why deposits might be low is that Australia has one of the highest top marginal tax rates on interest income amongst OECD countries.

Mr Bell said: “One of the simplest means to protect against unforeseen circumstances, such as the loss of a job, is to encourage people to have a savings buffer. So it is important that disincentives are replaced with incentives for encouraging greater private savings.”

The ABA strongly supports the policy principles guiding the proposals. It will be important to ensure that the required technical changes to superannuation, taxation and social security legislation effectively deliver the objectives of the proposals.
 
On the broad policy areas, the ABA considers that:

• Removing tax from superannuation benefits represents a significant step forward for the Australian retirement income system. The legislative rules developed to implement this package of reforms should be consistent with simplifying and clarifying the system for consumers and providers.
• Abolition of Reasonable Benefit Limits (RBL) will reduce complexity for consumers, but there are potential and administrative complexities which may impact providers.
• Retirement income rules should be simple, consistent and promote products, strategies and tools which will help retirees manage capital and income across retirement in ways that suit their needs, circumstances and preferences.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439

ENDS