Welcome to that super show, the podcast where we talk all things super from the inside. I'm Neil Benson, CEO of Superware.

And I'm Sarah Penn, CEO of Mayflower Consulting. Each week we unpack what's changing in the industry, what funds are wrestling with and how tech and regulation are shaping the landscape.

Sometimes we bring in expert guests, but mostly it's just us having a real conversation about how super is working and what could make it even better.

Let's get into it.

G', day, Sarah. Welcome back to that Super Show. You've on a little holiday, so welcome back. Hope you're feeling refreshed and ready to go.

Oh, I have, Neil. I've been in Bali for a week. It's the first time I've been since I was 19 and I'm 50, so 31 years. Oh my goodness. Things have changed.Anyway, it was fantastic. I thoroughly recommend it. I have been poo pooing the idea for years, but yeah. So here we are recording podcast on a Monday public holiday.That is commitment.

I tell you, I couldn't think of anything better to be doing. My family's all gone to the beach so I've got a break. Amazing.

Mine are asleep.

Well, since you've been away, there's been.

Quite a bit happening.

Our friend Joe Longo Asic has announced he's not going to be renewing his term or seeking to renew his term, which I think is May next year. So Asic is going to be looking for a new chairperson. What do you think about the stint that Joe Longor has had?

I'm disappointed he's not going to be hanging around for a while longer. Actually. He seemed to take quite a bit a middle of the road, balanced approach.He at least gave a good impression of getting, getting like being willing to listen to people in the industry as well as make up his own decisions around things. So I think it's a bit sad actually that he's, he's not going to be doing another term. He's been great.I feel like ASIC have had the right balance between going after people very forcefully and where I think which I think they should be, which is great. And at the same time also listening at least taking things on board.I do feel a little bit and sorry to anyone who's listening to this from Ahpra, I do feel sometimes that Ahpra the approach does seem to be a little bit more of the use are all criminals approach and yous can't be trusted.Having said that, I don't know that we've done anything to crown ourselves in glory in the superannuation in recent years with death benefits and insurance claims and all the rest of it.

True.

What do you think?

I thought he'd been in the chair.

For a lot longer.

It turns out he's only been there since 2021. It feels like he's part of the furniture. But he has been at ASIC for a long time. I agree.He seems to have done a good job, kept a steady hand on the tiller and I'm sure it'll be a hard act to follow. My recent personal dealings with ASIC have been pretty tough. Like their website is just woefully awful.As a small business owner trying to update my business address, I haven't been able to do it. I've tried every year for the last four years. Been unable to do it either over the phone or online. Just doesn't work. It's broken.Doesn't accept 4000 as a valid postcode and yet that's the, that's the postcode for the entire Brisbane cbd.

Well, you were in Brisbane, Neil. I mean it's a bit, it's, it's.

A backorder of the asset postcode database. And what was the other thing I.

Was trying to do?

I was trying to get a company extract recently to validate my company for a bank and trying to find out how to buy a company extract again. It's just a 10 year, 15 year old E commerce website and it's really showing its age. So ASIC's doing a good job.

Yes, it is.

I think ASIC's technology needs a bit of a kick up the bump and, but I'm sure that's not exactly Joe Longo's top priority over the last five years. So I wish the new chair well whenever they get announced over the next probably a few months. Yeah, Big shoes to fill.

Watch with interest.

Yeah.I don't know if you've been reading while you were on the beach about the latest Guardian and First Trust saga and I've got to be a little bit careful here because there's a lot of ongoing investigations but our friends at Macquarie have announced that they have recognized their role as a trustee of a superannuation investment platform that lots of SMSF trustees trusted with their investments.They have decided to reimburse all of those SMSF trustees I think at tune of $280 million, a lot of which they expect to recoup but they expect to be out of pocket about $100 million. And without admitting Any kind of liability.They've recognized that they could have done a better job at screening these managed investment schemes that they offered on their platform and helping some pretty naive SMSF trustees avoid some pretty dodgy schemes. What do you think of that one?

Well, I think that despite the fact that we all do love to hate Macquarie at times, they are in a financial position to be able to do it. Their profit last year was $3.5 billion.So while ending up out of pocket, 120 million is obviously is an outrageously large amount of money as a proportion for them. Actually it's not.And I'm quite impressed actually that they've taken the action to say, ok, we'll pay it out now and then we'll try and sort out what we can in the background.I do think this is one of the interesting times though, when all the times that people like to bang on about industry funds are there for members and retail funds are only there for the business.When you do have a very large business behind it like Macquarie that makes that sort of profit when something goes wrong, they are able to cough up the money to fix it without trashing their business.

Yes.

You know, if an industry super fund lost a huge amount of money on one particular investment, and that does happen incidentally, they don't have the reserves to, you know, even if they have very substantial reserves, they don't have $3.5 billion in reserves to just suddenly be able to go and get the money out to do something else with. And it is members money too, whereas this is not members money. So members aren't being impacted.

That's right, yeah.If this was an industry fund and the members reserves got tapped, then every other member would have to chip back into that emergency fund or the reserve fund to build it back up again. And so yeah, absolutely comes out of members pockets. But that's not true with a retail fund.

Having said that, there is obviously there's a range of retail funds too.The one end you've got Macquarie who make an absolute, I normally swear when I say this, tonne of money, insert expletive before tonne every year and are able to pay it back at the other end you have very small platforms like the ones that eqt, etsl, I should say, is the super trustee of that don't have any money.And then even ones in between, like large successful platforms like netwealth, who also impacted, they are successful, profitable, make lots of money, but still not to the tune of three and a half billion dollars in profit per year. And that's not sales either team, that's profit, as in money we get to put in the bank and go, aren't we clever?

So it does make me reflect on the role of trustees in selecting for things like member directed investment platforms which I'm a member of with my industry super fund.And I think I've got available certainly the ASX 200, maybe the 300 and a range of other ETFs that they have screened and made available to me on their platform and I often get a little bit frustrated and I've talked to the product manager at the ASFA conference and he's like, well you know, we just take a very conservative approach to making these investments available to our members. They take their trusty responsibility really seriously.I have to keep 20% in a pooled investment option and then I think I'm limited to 20% in any other option after that inside this investment platform. And now I'm beginning to understand why those guardrails are in place.Because if I was an SMSF trustee, there are no guardrails typically and I can go wild regardless of how much experience I have, how well I understand things like risk and volatility and diversification. Should there be a kind of qualification or test before you, you can become an SMSF trustee? Sarah?

Look, I know an awful lot about the self managed super fund side of things. As it happened, my last gig at Macquarie before I left and started my own business was head of smsf. It's such an interesting question.So there are a few things.The ATO risk rates every self managed super fund and if when you go to set up an SMSF you're considered to be high risk, they will call you on the phone and check that you understand what you've signed up for.That's not the investment side, it's the, it's the trustee that you understand your responsibilities as a trustee and if you don't understand your responsibilities as a trustee, they won't let you start a self managed super fund. Now some people might think that's overkill. I however don't because I don't think it's a very high watermark. Oh, funny story.I was at a big it was a self managed super fund association conference, this is many years ago and the ATO was there and they were talking about big presentation, they were talking about self managed super funds and how they risk rate them and changes they'd recently made to their risk ratings.And one of the things that they had noticed was that if the accounting firm that's attached to that SMSF hasn't done the accounting firm's tax return, then it's quite likely there'll be problems with the smsf.

Oh, okay.

You should have seen the faces in the audience. It was hysterically funny. And I'm sorry to any accountant who was there who had a horrible time. But do your tax people.

That's an interesting signal. I'm always impressed about the amount of data the ATO can collect and process and take some kind of intelligent meaning from. So yeah, good on them.I didn't know that they actually called prospective trustees and given a little quiz and determined whether or not they were worthwhile, knew what they were doing.

Yeah, they don't call everyone, they just call the ones that they think are the highest risk of going wrong. But as you say, it doesn't help on the actual investment side.It still doesn't stop people from blowing themselves up spectacularly by putting all of their money into one investment. Even if, I mean this is the thing, right.Even on paper, if something is considered low risk in adverted commas because it's a, I don't know, fixed interest or something, things can still go wrong.

Right.

I can't.It's so important for people to understand that even if you only want to invest in Australian fixed interest, there are still lots of options and you are still. If those people who had put. Because I think that's what the first guardian things were sort of classed as.They were like cash plus sort of investments, you know, basically like a term deposit, only better. It's great, you'll love it.

Yeah. Meanwhile, there's also property deals and shady investments behind the scenes.

Yeah, yeah, yeah.But if people just put some of their money into that and then some into other things that looked similar, they would still not have blown themselves up anywhere near to the same thing.So, yes, maybe we should just ask what diversification means and what an asset class is and it's not somewhere where you go to learn about investments. Boom, boom.

Yeah, well, there's all sorts of investigations still going on. I think it's going to be years before that saga wraps up. I do feel for the retirees who are massively impacted and the angst that that causes.I hope they get their money back.I do hope they don't get their money back from the compensation scheme of last resort which honest, hard working financial advisors have to fund from their fees because they weren't the ones giving dodgy advice. But we'll see who ends up out of pocket. With this.

Yeah. I couldn't agree more.And I think especially you and I are probably a lot more cognisant of that issue as well, because we run small businesses and most financial planners run small businesses.

Yes.

If you're a small business and you suddenly have to pay a bill of. And it keeps going up. Right. It's 20, $30,000 a year now and. Yeah. And increasing hundreds. Well, it's heading that way.

Tens of thousands. Oh, my good Lord.

Yeah, yeah, it's tens of thousands. Yeah, yeah. And going up. You know, at the same time, we're banging on about wanting more people to be financial advisers. We do this. Yeah.I think it's absolutely ridiculous expecting small businesses to pay those kind of levies.

Right. People like you and me who go and take financial advice.

Yeah.

17 Grand for a statement of advice.

Yeah. Well, exactly.

Yep.

Yeah. Couldn't agree more. What else have we got? Oh, here's a better.Here's a better news one, especially for you, because I know you feel very strongly about this one. The $3 million tax thing and unrealized capital gains.

Is it going to happen? Is it going to happen very slowly? Yeah. The treasurer has been quite quiet recently on the Div 296 front.I have to say that the conversation around taxing unrealized gains hasn't gone away. If anything, it's stepping up and more and more people are discussing the ramifications of it.For example, if you are a wealthy person considering investing in private equity or venture capital, where lots of investments might go to zero, but occasionally something will go to the moon, and you could quite easily see a $100,000 investment turn into a $3 million investment, and you're hit with Div 296. And those investments are not necessarily very liquid or easy to manage. They're quite often unexpected and hard to plan for.So could div296 reduce the amount of money coming into private equity and venture capital funds? That would be a big mistake.

I agree. Especially here in Australia, because we're even in those sort of funds already. It's very, very hard to get money out of those funds.As an entrepreneur and Australia already is quite conservative compared to other jurisdictions. And you find investors want to know it's going to be a sure thing, even for vc, when it's the absolute opposite of.And this would just make it even worse, IFM investments.

They had a private equity team, it's made some great investments over the last half dozen years, and they've shut down their fund like they've said they're getting out of the private equity game, which is.Well, it just means that Australian superannuation funds, I'm sure there's other fund managers they invest in when it comes to their private equity allocation.But, you know, IFM was set up by the super funds to invest on their behalf and their own fund is no longer investing in private equity, which breaks my heart.It just means there's one less avenue for growing Australian businesses to go to, to receive an investment from the superannuation system, which should be investing in both Australian public markets and private markets. I understand IFM has just said, look, private equity is just too small in Australia. We've got so much money to deploy, we're having to go outside.And so having a small local fund is just a distraction, like, oh, good Lord, that's dreadful, isn't it? Very sad, very sad.I understand what, you know, trying to deploy $4 trillion worth of capital could be a challenge, but I think trying to find some worthy growth companies here in Australia is a worthwhile mission. And I think superannuation should its fair share of helping Australian business owners build their businesses.

Yes, I agree.

Anyway, Div296, we haven't heard much about yet.

Crickets, one might say there still is.

A plan to have it come into effect retroactively from 1 July 2025, even though the legislation hasn't passed yet and we're well into financial year 26. I don't know.

Yeah, I think the fact that it's all gone very quiet hopefully means that some people have had some sensible discussions about it. Look, I have no issue with having another tax point at 3 million, because if you've got more than 3 million bucks in your super, well, good for you.And you can probably afford to pay a little bit more and you probably won't even notice, but the unrealized gains thing is just ridiculous.

Well, let's get back to that in just a moment.Our last news item, I wanted to congratulate Beck Wilson and the team at Chatwest, who this week announced the launch of their new epic retirement tick. Have you seen this one, Sarah?

Only very briefly because I have been on holidays. Did I mention holidays? But yeah, it looks good. I'm really glad that someone's actually doing it. I've got the list here of the six who got it.Host Plus Aware, Super Brighter, Super Uni, Super Telstra, super and Art.

Well done, well done to those funds.Yeah, So I read Beck's book maybe about a year ago, and it's a really great book called Epic Retirement and covers all the ins and outs of the superannuation system, but also focuses on things like finding purpose after you retire and focusing on your health so you have a nice healthy, long retirement. A really well rounded book. So I'd encourage anybody, you know, our kind of age thinking of retirement to grab a copy of that.So I recognized beck's name when ChatWest announced this assessment. They cover 18 different criteria.Things like admin fees, the availability of lifetime income products, availability of retirement planning, referrals to financial advisors. Really looks pretty comprehensive. So let's invite Bec on, let's see if we can get her on the show, talk more about the Epic retirement ticket.But you know, there's a lot of focus at the moment on what superannuation funds can do and should be doing to help their members prepare for a epic retirement or dignified retirement as, as we would call it. So yeah, that's, yeah, any kind of,.

Any kind of retirement. I mean, I think, I do actually think that the good time to read that sort of book is when you are, you know, 50ish.Rather than waiting until you have retired and then discovering that there's some different things you could have done is one of those things. There's that great quote, the best time to plant a tree is 20 years ago. And the second best time to do it is right now.

That's right.

So I do think if you, if you are past, you know, past 50 or into retirement and you listen to this podcast and you think it's too late, I'll just throw my hands up in the air and give up. That's not the thing to do. You should definitely take some action. Any action's better than no action.

Well, let's swing back to the idea of taxing unrealised capital gains if we can dwell on that for just a moment.

Go on then.

Because Australia's focus on income tax as the biggest source of tax in this country means that that burden is falling onto the shoulders of a smaller and smaller working population who have to pay enough tax to fund the benefits like obviously defence, which is.There's an argument for increasing the amount spent on defence, on aged care, on healthcare and ndis, a couple of the big ticket items that we spend money on.And I wasn't here whenever Superannuation launched in Australia in the 1990s, but my understanding is it was designed to relieve the pressure on the edged pension system so that government expenditure didn't have to spend so much money funding pensions but the amount of money that we're spending on pensions doesn't seem to have gone down yet.Is that just a timing thing that it will, Sarah, over the next couple of years pick up the slack as the people retiring in the 2000s and 2000s have a huge, you know, solid accumulation account and that they're not going to be able, not going to be drawing on age pension. What's going on there?

Okay, so there's a few things.Yes, the idea of the super system when it started in 1992 with 3% contribution, which at the time, hilariously, businesses did say was going to send them broke and it'd be a disaster in Australia to be uncompetitive on the world stage. And you don't understand. And of course that didn't happen.The plan, the point was then that they could see if you look at population curves then you could see that this was going to happen. Right. We have an ageing population. More and more people would be reliant on the age pension and the system would not be able to cope.So we're now 30 years into that roughly, and we're getting to the point now where people are retiring with a decent amount of money in their super.It's still not enormous though because you actually, the idea of super when it started was that it would be at 14% of average earnings for your entire working life and we're still only at 12%. So even for people who are our age, we've only started accruing larger amounts of super later on. So we're still the system.Even though 30 years sounds like a long time for a system like this, it's still fairly early days actually. The amount of money that people are retiring with now on average in their super is not enough to fund their full retirement by any stretch.However, there is now a small but growing cohort of people who are not eligible for that age pension because they have enough money in their super that they can fully self fund their retirement. And that proportion will continue to grow over time as more and more people are in the system for their full working life.So someone like me, I guess I will have been in the system because it started when I was 17. I will have been in the system for my full working life, but not at the really high percentage of my salary.Having said that, I will have a decent amount of money in my super and that will certainly, if I'm eligible at all for the age pension, it'll only be for a small part of it. So we're still quite early days in the big system.The other thing that obviously generally isn't looked at, people look at the total amount of money that's spent on age pension and yes, it's fecking enormous and it's not going down because people are getting older. But what we don't compare it to is Australia without Super.If we looked at what the age pension cost would be, if, if we didn't have super in Australia, it would be much higher.And those numbers are one of the main reasons why Australia gets touted as having the third or fourth best retirement income system in the world, pension system in the world, because of the stress that it is taking off the government. But yeah, we're still in there. We're still in the transition phase, Even though it's 30 years since the thing started.

I've been hearing that. Is it.Katie Gallagher, who's the Minister for Finance, has asked her team to take a look at edge pension eligibility, the asset test and the income test to see if that's still fit for purpose. There are.And it's a, it's a really delicate situation, delicate subject to talk about in public where we might say people who have enormous wealth trapped in their homes. You know, yes, Australian property market's been on a tear. Yeah.We have people with quite a low asset base other than their home or low income, and they're able to claim an age pension, full age pension, and yet that home that they do have is $5 million. You know, it's an enormous amount of money and yes, that seems a little bit unsustainable as well.But the idea of kicking an old widow out of her home or denying her a pension is unconscionable as well.I think we need to figure out a smarter solution for that because it seems unfair to ask the working population of people in their 20s and 30s and 40s to pay the age pension for those folks who have amassed huge value of their homes. But yeah, very delicate subject to try and tackle.

Well, it is, I think it's one of those ones though, where you have to look at the macro situation and then the personal situation and work out how to, how to balance those things up. So if you look at it a macro point of view, it's ridiculous.But then if you look at it a personal point of view, obviously we don't want to kick out, kick grandma out of a house that she's been in forever. But also quite often, if you ask Grandma if she would like to buy a new, would she be happy to Downsize.There's, and I know people who are in this situation, people do want to downsize. But then we're back to all the issues with housing stock in Australia.

That's right, there's nothing available. You have to pay stump duty, it's not available.

Blah, blah, blah, blah, blah. We make it really hard. People want like one story apartment.People like ideally what you want is like a three bedroom, one story apartment in an existing building. Not one that's being built now that might have God knows what problems with concrete and all the rest of it in it. They just don't exist.And even the, even the apartments that are being built now are generally two bedroom apartments maximum. There's hardly any three or four bedroom apartments. And if you're a grandma, then you probably want a three bedroom apartment, right?Especially if you want a bedroom to sleep in. Or maybe you and your partner sleep in separate rooms because you both snore, not talking personally.And then you want a spare room for when the grandkids come to stay. And maybe you want to study. I know my dad has a study in his house. That's not off the realms of reasonable when you say it, but there aren't any.So I think before we chuck grandma out of a big house, we have to make sure she's got something smaller to move into.The other thing that is definitely there, which isn't used very often because we went through a stage of them being really dreadful, is a reverse mortgage.So the reason they would a reverse mortgage is when you borrow money against your house and when you die, the bank gets whatever money you owe them out of your house, which is fine. The problem is we had some in the sort of early 2000s where people could end up owing more than their house was worth.

Oh, good Lord.

Which obviously is just not cool. But none of the reverse mortgages that are currently available work like that. And I do think reverse mortgage is a really sensible way to do it.Right. Because then you are actually using the equity in your house.You can stay in your massive five bedroom house if you want to, or you can't find somewhere else. You can avoid all the stamp duty and all that crap. And yeah, you can have a very nice life.So I do think, because we do have things like that available, I do think that the actual assets should be looked at at least more than they are now.

Well, we wish Senator Gallagher well on her mission to review that. Yes, definitely a subject worth talking about. And I think we'll hear more of that in the press over the next 12 months. I hope we do.

I hope so. I think it's a debate. It's this thing. Yeah, it is a debate. We have to have at a macro level.You can't, you can't just keep giving out more and more money when people are sitting on more and more money but can't access it. It's an. To me, it's the access issue. If we can solve the access issue, then we don't have so much of it being a personal issue.

Well, let's keep the debate going. That's what we're here for, Sarah, to talk about it on podcasts like this.Sarah, what have you got coming up in terms of events in the next couple of weeks? Anything exciting happening?

Oh, well, I am very excited to be chairing a panel at the Post Retirement Conference which is on 21 and 22nd of October. This has been running, this conference has been running for years actually. It's very popular, worth coming along to.And I'm going to be chairing a session on, you'll never guess, housing, age, pension and retirement income that interconnected.

Oh, we couldn't plan that any better if we tried.

I know.

And yeah, I've got some really interesting speakers coming along actually to talk about the money side of things and the people side of things, which obviously is how all this stuff ends up playing out. But I do think that'd be really worth, really worth attending.And then of course there's also the FSC Innovation in Retirement Conference, it's on the 16th, which is Thursday next week. That's a one day conference. I'm looking forward to that one as well. Not presenting though, just chatting.

Just chatting.Well, we'll put links to both of those and the only thing I've got coming up then I think is the ASFA conference here in the Gold coast or just on the road in the Gold coast next month. So looking forward to seeing you there.

Yeah, me too. Hang out in person.

Thanks for listening to that super show. We hope today's episode gave you something useful to take back to your team.

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