industry & policy
Streamlining super
The importance of building
stronger links between aged
care and superannuation.
I
n 2013, the Productivity Commission’s
findings indicated that there were an
existing 1.3 million aged care users in
Australia, and that this number would likely
increase to 3.5 million by 2050. With this
predicted growth in mind, it is now more
important than ever that systems be put in
place to ensure that retirees can manage
their funds effectively.
The lack of synergy between aged
care centres and super funds is, in part,
evidenced by the complexity of the
superannuation system and the seemingly
endless guidelines set out by the Aged Care
Funding Instrument – the government’s
main funding tool. Because of this inherent
complexity, it is understandable that a
growing number of individuals are turning
to aged care placement services in their
attempt to navigate the system. These
intermediary agents, while providing a
justifiable service, also succeed in adding
further costs to the bill of the average
aged care client.
When you examine the current
system, it becomes apparent that further
costs such as these are the last thing
Australian retirees need. Today, paying the
accommodation bond required by aged
care centres poses the biggest threat to
an individual’s superannuation. Existing
regulations place only one limit on aged
care accommodation bonds – that limit
being that a resident must not be left with
anything less than $33,000 after payment.
This lone rule means that some retirees are
essentially forced to sell their home and
withdraw the entirety of their super just to
pay the aged care accommodation bond,
which leaves them surviving on the age
pension and their remaining savings.
So, the question remains: How can the
relationship between the superannuation
and aged care industries be improved?
To transfer your superannuation account
balances between funds, you simply fill
out and submit a rollover initiation request.
If the Australian Taxation Office could
simplify the transfer of funds between
superannuation and aged care in a similar
fashion – surely this would result in
increased efficiency and decreased stress
for the ageing demographic?
Speaking at an industry conference
in August, ATO assistant commissioner
Kasey Macfarlane explained that access
to accurate information and initiatives
such as SuperStream are proof that
the superan nuation industry is seeking
to become increasingly electronically
automated.
“One of the biggest changes I have seen
recently is the significant influence advances
in technology have had on the way that
the self-managed super fund (SMSF) sector
operates. For example, increasingly we
are seeing SMSF administrators utilising
software to provide individuals with online
and real-time access to information and
alerts about their SMSF and superannuation
account,” Macfarlane said.
With Australia’s senior citizens becoming
increasingly tech savvy, a computerised
system may consolidate, as well as simplify,
the relationship between superannuation
and aged centres.
The former chief executive of Christian
Super, Peter Murphy, argues that the
Australian government has a vested interest
in making significant improvements to the
intersection of the superannuation and aged
care systems. Considering the expected $1
billion per annum rise in aged care costs
to the government, a refinement of the
SuperStream system may be required to get
tangible, long-term results. However, expert
opinion is divided.
At a SuperRatings and Lonsec event in
October, former treasurer Peter Costello
argued that the government should manage
default superannuation contributions.
He criticised the current system: “Instead
of the government arbitrating between
industry funds and private funds, there is a
fair argument that this compulsory payment
should be allocated to a national safety-
net administrator, let us call it the Super
Guarantee Agency, a not-for-profit agency.”
This proposal did not sit well with the
Association of Superannuation Funds of
Australia (ASFA). The umbrella lobby group
voiced concerns that the idea would
effectively nationalise superannuation
and put retirement savings “at risk”. ASFA
chief executive Martin Fahy maintained
that “entrusting administration to a
government-run entity would reverse
significant efficiency gains delivered
through the government’s SuperStream
program, which sets very high standards
for private administrators”. He later
added that the $900 million invested in
SuperStream by the super industry would
be “wasted” if Costello’s Super Guarantee
Agency was implemented.
Regardless of the debate that continues
over possible solutions, the fact remains
that as many as 76,000 new residential
aged care facilities will be necessary to
meet the nation’s demands by the year
2023. In preparedness for the future,
Australia’s ageing population needs a more
streamlined intersection between the
super industry, aged care facilities and the
government. ■
Nationwide Super is a multi-industry
superannuation fund that has been serving
the Australian community since 1987.
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