Special Feature: Investment in Social Housing

The Australian federal government has met with the superannuation industry encouraging investment in social and affordable housing to tackle the supply shortage.

Social housing in Australia
As released by the Australian Institute of Health and Welfare (AIHW) in 2022, the social housing program includes four sectors, and their respective number of households within 10 years are shown in the figure below:
• Public housing
• State-owned and managed Indigenous housing (SOMIH)
• Community housing
• Indigenous community housing

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Special Feature: Superannuation Data Transformation Project

Superannuation funds and their Trustees are required, under the Financial Sector (Collection of Data) Act 2001, and it’s reporting standards to provide data to APRA. The process to date has been an onerous burden on Trustees and their respective administrators.

APRA’s Superannuation Data Transformation (SDT) project aims to bring about positive changes in the superannuation industry by ensuring better data management practices, fostering transparency, and ultimately benefiting superannuation fund members. The objective is to enhance the compatibility and consistency of reported data by replacing data collection via Excel-based manual process to a more efficient automated scalable solution to improve the depth, breadth, and quality of its superannuation data collection.

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Special Feature: The Impact of the Early Release Superannuation Scheme

The long term impact to individuals superannuation accounts due to the COVID -19 pandemic will not be known for many years to come. Building a nest egg for retirement is a compulsory requirement for working Australians, foregoing money now for the future is designed to help Australians become self-sufficient in retirement. The impact of removing superannuation savings now, and potentially forgoing 5 to 7 per cent annual compound returns over the long term may have material impacts to a member’s final balance in retirement.

Recent data released comprising the early super release shows that people aged between 25 to 34 drew down the largest portion of their super balances, drawing almost 35%, followed by people aged between 35-44, drawing almost 20% of their total super balance. There are many reasons why individuals have had to dip into their super balances, ranging from insufficient support, not being eligible for Jobkeeper or not being eligible for Jobseeker. A quote from Eva Scheerlinck, chief executive of the Australian Institute of Superannuation Trustees (AIST) in the Australian Financial Review made mention to the shortfalls “The early release scheme, unfortunately, forced many people to choose between poverty now or poverty in retirement”.

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Special Feature: Retirement Income Review – Superannuation Guarantee

Whilst the recently released Retirement Income Review didn’t produce any specific recommendations, it did propose and sound out future possibilities and the state of the current compulsory super scheme. Research conducted within the report demonstrates that the current Australian retirement income system is effective and sustainable. A big talking point from the review, and one which has been discussed at length is the proposed increase to super guarantee whereby under current rules, employers must pay 9.5% of their employees income into super, with legislated increases to 12% on 1 July 2025; the incremental increases can be see below.

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Special Feature: Global Pension Assets

Recent studies conducted by Willis Towers Watson into Global Pension Assets concluded that Australia has been one of the worlds most successful pension markets, with assets under management increasing on average 11.3% p.a. over 20 years to 2020 in USD terms. This figure represents fund returns and mandatory/voluntary contributions into the superannuation system.

The Global Pension Study covers 22 major pension markets, Australia, Brazil, Canada, Chile, China, Finland, Germany, Hong Kong, India, Italy, Japan, Malaysia, Mexico, Netherlands, South Africa, South Korea, Spain, Switzerland, UK and the US (the P22.) As at December 2020 the P22 had roughly US$52,522 billion in pension assets, which accounts for roughly 80% of the GDP of these countries. As shown in the below table, pension assets as a percentage of a countries GDP concluded that The Netherlands had the highest assets/GDP ratio, representing 214%, with Canada coming in second with 192% followed by Australia at third, with 175%. It can also be seen that China had the lowest assets/GDP ratio, representing only 1.9% of GDP. In terms of total pension assets, the US clearly has the largest size, representing 62% of the total P22 assets, followed by the UK and Japan, with Australia coming in at number five.

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Special Feature: Self Managed Super Funds

Self-managed super funds (SMSFs) are Australian Taxation Office (ATO) regulated funds. Generally speaking, SMSFs are private superannuation funds. They are required to have four or fewer members, all members are trustees or directors of the trustee company, no trustee of the fund receives any remuneration for their services as trustee and no members are employees of other members.

Having an SMSF can provide greater control for some individuals, having full oversight into all aspects of your super, rather than relying on an industry or retail fund to manager your super. While this may sound appealing, managing super independently, it does involve experience, education, management, compliance and administration costs as well as a detailed oversight into the superannuation environment.

While professional super funds are regulated by APRA (Australian Prudential Authority), SMSFs are regulated by the ATO, meaning that regulatory oversight differs. For example, in the instance of investment theft or fraud, funds regulated by APRA can apply to the government for compensation which if funded via an industry levy, whereas SMSFs cannot, with the pursuit of compensation coming out of your own expense.

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Special Feature: Actuaries Institute Retirement Policy Review

The recently released Actuaries Institute review into Australia’s Retirement income for Australians, titled “Securing Adequate Retirement Incomes for an Ageing Australia” was conducted over the course of the past year and involved more than 200 actuaries who provided thorough research and recommendations.

The review assessed the current superannuation guarantee level and what the optimal level of superannuation should look like based on an individual’s personal circumstances in order to achieve a desired level, use of the family home in retirement, how advice can result in better use of superannuation savings and the Age Pension means test. The review concluded “Australia’s retirement system should be fairer, simpler and more efficient while the role of guidance and advice should be enhanced”.

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Special Feature: Superannuation Data Transformation – Phase 1

APRA released the first in a series of new statistical publications that leverage new reporting standards implemented in Phase 1 of the Superannuation Data Transformation project to increase the transparency of the superannuation industry in October 2022.

The new report contains information on the number and types of products and investment options available in the superannuation industry for the first time, and the frequency of publishing member demographics data will be changed from annually to quarterly

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Special Feature: YFYS Performance Test for Choice Funds

In April 2023, The Australian Prudential Regulation Authority (APRA) published the most recent Choice Heatmap, providing insight into member outcomes in the superannuation product segment where investment options are actively chosen by consumers.

Choice products, constituting 46% (amounting to $859 billion as of June 30, 2020) of total APRA-regulated superannuation member benefits, are options that members actively opt to participate in. These products are usually characterized by greater complexity and diversity compared to default MySuper products. The distribution of member accounts and member benefits in APRA-regulated superannuation entities as at 30 June 2020.

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Special Feature: Australian Sustainability Reporting Standards

In June 2023, the Australian government released the second consultation paper on climate-related financial disclosure to ensure greater transparency and accountability of large businesses and financial institutions regarding their climate-related plans, financial risks, and opportunities.

The reform principles are designed by the Australian Treasury to:

  • Support climate goals of net zero emissions by 2050,
  • Improve quantity, quality, and comparability of disclosures,
  • Assist businesses, investors, regulators, and the public in having a clear and common understanding about obligations for entities to disclose climate-related financial risks,
  • Align with international reporting practice (e.g. IFRS Accounting Standards),
  • Be scalable and flexible to accommodate future developments in the global baseline,
  • Be allied to risk.
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