Quick Concept is a recurring set of posts, each of which is effectively a raw idea for something – be it social policy, a business concept, a game, or something entirely random. The basic idea is to set out the raw concept in a short piece with minimal research and not a lot of consideration of the wider impacts it might have. Hopefully, it’ll get a few arguments going. And hell, you never know, maybe a halfway decent idea will come out of it one day.
A few days ago I posted the first Quick Concept, suggesting that people with a moderate level of superannuation for their age should be able to opt-out of paying their compulsory super in to a fund and instead be able to receive it is part of their general income.
I now think that idea is overly complicated and prone to a number of flaws and concerns. My new Quick Concept on this topic is giving people the ability to withdraw from their superannuation funds at any stage of their life, if and only if, the withdrawal is being used to reduce debt that results in a net improvement in the individuals long-term financial position. I struggled to find reliable figures for the average long-term trend return for Australian Super funds as a whole, but the fund I use has a 5-year return of 5.46% and a 10-year return of 7.23% [1. These figures are for REST Superannuation’s Core Strategy option to 31 December 2010 as available on their website. I have little idea how this compares to the industry as a whole, having last checked out the relative performance of various super funds way back in 2008.]. If these figures were accurate for the industry as a whole and for the long-term trend then this would suggest that in terms of our long-term wealth, we would be better served if we were able to use funds from our super accounts to pay down our home loans (assuming a rate > 7.23% was likely over a 10-year cycle, which seems reasonable. Though obviously some research would be required to confirm this) or to pay down our HECS debt (assuming one was taking advantage of the 10% bonus for voluntary repayments over $500).
Thoughts and criticisms?
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