Election 2016: Labor seizes on Peter Costello’s comments about Coalition’s superannuation policy

Labor seizes on Peter Costello’s comments Coalition superannuation changes won’t be as beneficial as promised.

Former treasurer Peter Costello has questioned the Coalition’s claim that its $1.6m superannuation savings limit is enough to generate four times the age pension.

Labor has seized on comments by Howard government treasurer Peter Costello warning that the federal government’s proposed changes to superannuation transfers will not be as beneficial for retirees as promised.

Mr Costello told a lunch for Women in Banking and Finance yesterday that the changes, which would put a cap of $1.6 million on tax-free superannuation pension transfers, are not as generous as they appear.

“The government said $1.6m was four times the age pension,” Mr Costello said. “That is on the assumption of a 5.5 per cent return rate. That is what the government thinks you are going to get. Does it really think that? It is issuing bonds at 2 (per cent).”

Dr Jim Chalmers, Labor’s spokesman for financial services and superannuation said: “Scott Morrison’s ill-considered superannuation policies are quickly unravelling”.

“When Peter Costello of all people tells the Liberal Treasurer that his policies are irresponsible, you know that there’s something deeply wrong,” Dr Chalmers said.

“Scott Morrison needs to own up to his policy mess in super and admit that his proposed policies are retrospective and of a type he has railed against previously.”

In his Budget speech, the Treasurer said: “A balance of $1.6 million can support an income stream in retirement around four times the level of the single Age Pension.”

Mr Morrison also announced a 30 per cent tax on concessional contributions to those earning over $250,000, a reduction in the annual cap on concessional superannuation contributions to $25,000 and a lifetime non-concessional contributions cap of $500,000.

On Monday, the Australian 10-year government bond yield dropped to an all-time low of 2.2 per cent.

The fall in interest rates has prompted the $120b Future Fund, of which Mr Costello is chairman, to open negotiations with the federal government to discuss reducing its long-term target.

The Future Fund was created in 2006 to provide for unfunded Commonwealth superannuation liabilities, however, this year it posted a negative quarter performance for the first time since June 2012.

“Does the government want us to go after 5 per cent, which means we have to move up the risk curve quite considerably?” Mr Costello said.

“Or would the government rather us preserve what we’ve made, and reduce the target so that we stay where we are on the risk curve? That is a big issue. Does the government have an appetite for us to chase risk? I don’t think so.”

Mr Costello warned low rates of return would force Australians to work for longer, or push more onto the age pension.

“What is going to give in this situation? The first thing that will give is that you will run out of money and go back on the pension, or a part pension. That is what most people in Australia are going to do. The other thing is that many people are going to work for longer, beyond 65. They’ll put off their retirement,” he said.