Government’s proposed superannuation objective is “fatally flawed”

The Government’s proposed legislative objective for superannuation is “fatally flawed”, according to Industry Super Australia.

In a submission to the Senate Committee inquiry into the Superannuation (Objective) Bill 2016, Industry Super Australia says that setting an objective as a means to evaluate policy proposals is sound but the objective in the Bill is flawed.

“Among other reasons, the primary objective is flawed because it would not provide a basis for comparing and evaluating future superannuation policy proposals,” says the submission.

“In addition, to be successful, the primary and secondary objectives should have broad support. This requires effort and consultation. The proposed objective before the Committee does not enjoy broad support. The superannuation sector has made clear to the Government that it rejects the proposed primary objective as misguided.”

Industry Super Australia says the Government has only conducted a “superficial” consultation process. The submission says that the Committee reject the objective contained in the Bill and recommend in its report that the Government undertake a consultation on an objective which “allows policy proposals, business conduct, and individual decisions to be evaluated consistent with the social policy objectives of the superannuation system.”

Industry Super Australia puts forward the following as a suitable objective for superannuation:

The objective of the superannuation system is to deliver financial security and dignity in retirement to all Australians by providing regular income that is, when combined with any public pension and other sources of income, sufficient to secure a comfortable standard of living by reasonable community standards.

The Senate Committee is due to give its report by 14 February 2017.

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One Reply to “Government’s proposed superannuation objective is “fatally flawed””

  1. “The objective of the superannuation system is to deliver financial security and dignity in retirement to all Australians by providing regular income that is, when combined with any public pension and other sources of income, sufficient to secure a comfortable standard of living by reasonable community standards.”

    And there is the problem smack in the middle of the ‘proposed’ objective: The notion of Super payments being combined with Aged Pension payments!

    The current objective can be read by future politicians to mean that Super payments are designed to replace AP payments.

    Putting it bluntly, at pensionable age you either get the free AP or save cash in Super all your life and be paid from your Super savings. Meaning, Super payments can be any amount BUT before you are paid any part AP your income from Super has to be below the full AP payment!

    AP for a couple with a house is $35,000. Super income would have to be below $35,000 before you are paid $1 from the AP. (Super income would include a deeming rate.). There would be no combined SP and Super payment giving an income greater than the full AP.

    If you can save a large nest egg in Super then good. But if you only have modest savings then those savings go would deny you any boost from a part AP payment. In other words, you would be effectively saving for your own AP payments!! Which would then question the merits of putting more into Super on top of employer contributions.

    This could also give birth to an inability to withdraw lump sums from Super AND an have an inability to allow others to inherit what ever savings are left over in your Super fund when you die.

    Go back and read the adopted objective of Super and then tell me how future Governments could not come to the same pessimistic point of view!!!

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