The Government has started the process to enshrine in legislation an objective for superannuation, with the release of a Discussion Paper.
“Having an agreed objective for superannuation is critical to securing trust and integrity. It is also a means for increasing confidence in the superannuation system as a whole,” said Assistant Treasurer and Minister for Small Business Kelly O’Dwyer.
“We want to have a conversation about the precise wording of the objective – to help frame the broader conversation we need to have about superannuation.”
The Financial System Inquiry recommended that the Government:
Seek broad political agreement for, and enshrine in legislation, the objectives of the superannuation system and report publicly on how policy proposals are consistent with achieving these objectives over the long term.
The Government agreed with the recommendation, saying: “We will enshrine the objective of the superannuation system in legislation. This will help align policy settings, industry initiative and community expectations.”
The Government response to the FSI report said this legislation would be developed and introduced to the Parliament by the end of 2016.
The discussion paper says “a legislated objective will serve as a guide to policy-makers, regulators, industry and the community about superannuation’s fundamental purpose”.
“The objective will provide a way in which competing superannuation proposals can be measured and a framework for evaluating the fairness, adequacy and sustainability of the superannuation system.”
The Government accepts the primary objective for superannuation suggested by the FSI panel:
To provide income in retirement to substitute or supplement the Age Pension.
Though the discussion paper notes “a single primary objective cannot possibly encompass all aspects of the purpose and attributes of the superannuation system,” and so there would be ‘subsidiary objectives’.
“For example, the purpose of superannuation is not to allow for unlimited wealth accumulation and estate planning – a notion that is not explicit in the primary objective.”
The Government asks three questions:
- Do you agree with the objectives recommended by the FSI? Why?
- If you do not agree with the FSI recommendation, what do you think should be the objective of superannuation? Why? What are the implications of this objective?
- In which piece of legislation should the objective be legislated and why?
The discussion paper notes that the legislative objective could be included in a preamble to an existing Act, such as the SIS Act, or in a stand-alone Act.
The closing date for submission in response to the discussion paper is Wednesday the 6th of April.
Opposition welcomes process, calls for bipartisanship
The announcement of a consultation process to set an objective for superannuation has been welcomed by the Labor Party.
“We call on the Government to attempt to reach a bipartisan agreement on the objectives of superannuation,” said a joint statement by Shadow Treasurer Chris Bowen and Shadow Minister for Financial Services and Superannuation Jim Chalmers.
Superannuation industry welcomes prospect of stability
Industry bodies have welcomed the release of the objective for superannuation discussion paper, with the prospect it will increase stability in policy.
“Setting an objective for super will provide a much-needed framework to protect the super savings pot – now worth more than $2 trillion – from endless ad hoc policy changes,” said AIST CEO Tom Garcia.
“Industry super funds are unequivocal in their view that members’ best interests must be enshrined first and foremost, if any legal definition is to be meaningful,” said David Whiteley, Chief Executive of Industry Super Australia.
“Hopefully, it will also help to liberate superannuation policy from the constant unhelpful political tinkering that comes with the Budget and election cycles. This will help build public confidence in the system.”
ASFA CEO Pauline Vamos said: “The government’s commitment to defining the objectives of superannuation and enshrining this in legislation will provide an enduring reference point to guide future decision making by all policy makers.”
“Agreeing and adhering to objectives will increase confidence, lead to greater levels of equity, and improve retirement outcomes for all Australians by reducing the politics in policy making.
The Government announcement was “warmly welcomed” by the SMSF Association.
“The Association, which has long called for the objective of superannuation to become law, will work closely with the Government to develop the legislation and achieve a goal it firmly believes is critical for the long-term viability of superannuation,” said an SMSFA statement.
“It’s been our strongly held position that having a universally agreed primary objective is essential to bring stability to superannuation policy and help take it out of the budgetary cycle where it is at the mercy of the government of the day’s fiscal demands,” said SMSFA CEO Andrea Slattery.
“A clearly defined objective for superannuation, with broad public support, would strengthen confidence in stable, long-term settings for what is our only truly intergenerational public policy,” said FSC CEO Sally Loane.
“Consumers need confidence that superannuation savings accumulated during their working lives will provide them with appropriate living standards in retirement. Enshrining the objective of superannuation in law is a very positive step for building and maintaining confidence in the system.”
Objective for super should be adequate retirement incomes: ACOSS
ACOSS welcomed the Government’s commitment to legislating a purpose for superannuation, but said it should be adequate retirement incomes not wealth accumulation.
“There is a yawning gap between what the super system should do and what it actually does,” said ACOSS CEO Cassandra Goldie.
“The system should ensure that every worker has an adequate income in retirement above pension levels. In reality it has become a wealth accumulation and tax avoidance vehicle for people with high incomes.”
“Reaching agreement on the purpose of superannuation is an important step in the reform process, but it should not delay the comprehensive tax reform we have been promised. It’s time to stop the endless tinkering with super and put things right.”
Want to be kept up-to-date with SMSF and Superannuation changes, why not subscribe to our Newsletter?
This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.