Monumental stupidity: Why super cap plan will backfire

It’s the stupidity, stupid.

What’s got lost in the understandable furore over Albo and Jimbo’s menacing ‘that’s a nice little super balance you’ve got there, pity if anything happened to it’ play, is the basic but monumental stupidity of what they are clearly proposing to do in May.

Simply, that they would almost certainly ‘achieve’ the exact opposite of what they are seeking to do – ‘save’ tax dollars. Put aside all the big issues around what – it’s worthwhile to remind everyone - is compulsory, government-mandated superannuation, and focus on Albo-Jimbo’s one big driving issue. That the so-called ‘tax concessions’ are increasingly growing to be too big.

Accompanied by the meaningless factoid that by 2050 these – to repeat, so-called – tax concessions are going to be costing the budget more than the age pension. Nevertheless, what would actually be the worst possible outcome, on their terms?

Answer: if we (the taxpayer) still paid out almost all those super concessions, year after year between now and 2050 and indeed beyond, and the age pension actually increased from what it would otherwise have been.

That is to say, that their ‘reforms’ – specifically, the proposed $3m balance cap – actually, directly, put more people on the pension going forward than would otherwise have been the case. And not just the pension; indeed adding even more cost, the health card that goes with it and to a lower-income self-funded retiree. Gee what a trade. A reduction in a tax concessions – actually, just taking less tax – in return for, maybe, 30 years of age pension and the health costs of an old person.

Prime Minister Anthony Albanese (front) with Treasurer Jim Chalmers. Picture: NCA NewsWire / Gary Ramage

This would be the ultimate, negative, absolutely counter-productive, two-fer.

That what the, by then long-gone, duo of Albo and Jimbo actually achieved with their ‘reforms’ was to place more people on the pension and the health card in 2050 and beyond, than if they had just left super alone as it was in 2022. Let me pose this simple question – which is clearly beyond the ken of Albo and Jimbo.

What is the best way to ensure that people actually stay on self-funded retirement and off the pension?

That they actually die with significant balances in their super funds. That they actually successfully engage in that ‘estate planning’, bestowing – horror of horrors – an estate to their beneficiaries.

That a cap would actually encourage retirees and near-retirees to cash-in excess balances to ensure the pension and the health card.

There are two functional stupidities in thinking that a trainee treasurer and an incompetent treasury can in 2023 combine to ‘guess’ at how much either the ‘average’ retiree, far less the wide range of individual retirees, in 10, 20 and 30 years time, will need as their savings balance to fund their retirement. The first should be obvious.

Will $3m be enough? Yeah, sure, just like 10 years ago $1m would have been considered more than ample – with prices where they were and a balance then earning, maybe 8-12 per cent a year.

I would advise our trainee to inform himself about all those civil servants in the UK who retired on generous – fixed – government pensions of, say, £20 a week in the 1950s, and were driven into poverty in the soaring inflation of the 1970s.

The second is how long are you going to live in retirement? 10 years? 20 years? 40 years?

Is Jimbo seriously suggesting we can neatly plan to run our balances down to zero at the date of death?

But even if you did, your balance would long since have dropped to the point where you moved into the pension and the health card.

He really is that stupid. He is incapable of understanding that the tax man should actually want people to die with, say, $2m in super.