The move by the assistant treasurer Senator Jim Short to open the superannuation market to banks and credit unions is a welcome one. Australia’s saving base is notoriously low. Anything that gives an incentive to saving is worthwhile.
Under present rules, banks have had to set up cumbersome separate trustee-type structures as subsidiaries. This has meant costs and inconvenience. The beauty of allowing banks and credit unions to get into the business directly is that they will be able to provide over-the-counter services. Superannuation will become more accessible. Under present arrangements, bumping up superannuation contributions can be difficult. With over-the-counter superannuation accounts (or even ATM accounts), customers will be able to drop savings in easily. They will see the tax advantages very quickly. Superannuation earnings are taxed at a far lower rate than ordinary interest earnings. But once someone takes the tax advantage, they cannot later withdraw the earnings without pay the difference in tax (unless they have reached retirement). The incentive to keep the savings in place is obvious.
It will be necessary to ensure that contributions are guaranteed. That may pose some difficulty with credit unions. Also there might be some overlap of supervisory bodies’ functions. But neither is insurmountable.