Employer, Employee, Super and Cash Money.

Employer, Employee, Super and Cash Money.
Posted Tue, 04/11/2008 - 12:53

Rather than companies having to lay people off left right and centre as is the next wave and impact of the credit and liquidity problems. A thought.

Rather than an often sensible government enforced payment of Superannuation from both employer and employee, perhaps there should be a 12 month amnesty and both parties should have the choice to forego super payments and of having it in their pockets NOW, at a time of need.

It would reduce burden on individuals, households, business and most importantly right now, not lose substantial value the second it hit the superfund.

Think for a second. At the moment a notional superannuation contribution (read deduction in the interest of your future welfare), is made of let's say $100 by the time it hits the super fund and is invested in portfolio of investment vehicles its actually worth less than $90 and with the last few months sharemarket what was $100 that could have been in your pocket three months ago is now worth about $75-80 that you can't touch. More importantly the constant beat of the drum for Super contribution is the importance of compound growth. Well what goes up also comes down and that compound also has to work backwards. So what is the loss of 20%+ value today actually losing us in compound growth for 25 years?

What say you?

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 Noble idea, but that'd only

Thu, 06/11/2008 - 21:28 — Ben

 Noble idea Adrian, but that'd only worsen the crisis.

Firstly, one of the few things keeping the sharemarket and financial institutions alive is the guarantee of super money. It's a massive, constant and reliable flow of cash coming into the sharemarket. Without Australia's generous and excellent 9% minimum salary contribution, the markets would be a big step closer to starving.

Cut off 9% of the national wage total being fed into the markets right now and we'd be facing a much bigger disaster.

The fees also keep fund managers ticking over. We do not want our super fund managers losing income and increasing the risk of insolvency. You and I face a very serious situation if that happens.

And the cash that's coming in helps fund redemptions for those retiring right now - meaning fund managers don't have to sell shares at a loss to pay new retirees - which would hurt fund values even more. It's cash for them to manoevre with - a predicatable, reliable flow of cash to help them manage the crisis. 

Secondly, most super funds are at least 2/3rds invested in shares - and now is absolutely the very best time to invest in shares - especially if you're in for 20-30-40 years, which, because it's super, you will be. There really isn't a better investment opportunity than super right now. The market will pick up, and all your super contributions that are buying shares dirt cheap now will deliver above average growth when the market returns to parity.

A 9% "payrise" for a short period isn't worth that. Those with jobs can budget to equal that 9% - and better. Cut luxuries.

It's those who have lost their job that need help - and they aren't paying any super. So while I agree with the sentiment of care, it's not a plan I'd be supporting for the greater good.

Cheers.