Talk of a $5M Cap on Superannuation Balances., page-176

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squidd

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01/03/23

07:18

Post #: 66527103
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Originally posted by Hittman: ↑

28 Feb 2022 — Mercer has called for a super balance cap to be introduced in the name of equality, fairness and sustainability. The federal government has been ...

10 Feb 2021 — The Association of Superannuation Funds of Australia has called for a $5m cap on the amount of money that can be saved in superannuation

As you can see this was being discussed long before the government got involved.

As for the red herring argument about fees, the fees gained on the High Balances received compared to total fees received on all balances is minimal.

Superannuation is a captive market, it is compulsory, there will always be money coming in garnering fees for the funds. The small (comparatively) loss is wearable vs the liability risk.

The rules for Super funds regarding our money are quite strong and with their ability to affect markets and the liquidity issues that arise from having to cover large balances it is in the funds interests to limit their liability.

Pyramid Building Society collapse is a good example of results from poor liquidity. An article in TheAge newspaper basically said peoples money was not safe in Pyramid and a run on funds ensued. Pyramid did not have the liquidity to cover.

Superfunds invest in illiquid assets like Commercial and Retail Buildings, Government Bonds etc by which they get paid a clip.. IE a Return that they can use for accounts earnings. Cash holdings for a mass withdrawal are just not there. In 10 to 15 years we have baby Boomers and Gen X reaching preservation age and retirement age that are going to have full access to their money. This is going to cause liquidity issues for funds. Dollars to doughnuts we will see limits on withdrawals brought in soon as well as this current legislation on high balances.

Compulsory Super Pensions and Annuities are coming.

400000 Super accounts with over $1M and growing in both number and amounts

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These are some really interesting points and not something I'd read about previously.

Before I wander off into the wilderness of the internet looking myself, do you have any particular links that you think are worth reading regarding this future liquidity issue?

Cheers!
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Talk of a $5M Cap on Superannuation Balances., page-176

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