The Association of Superannuation Funds of Australia (ASFA) has recommended a legislative objective for superannuation.
“A clear and measurable objective will eliminate ambiguity and build trust and confidence between policy makers and the community. It will protect against detrimental changes that erode belief in the system and promote policies that deliver an adequate standard of living in retirement,” says the ASFA submission to the Government consultation process.
ASFA recommends the following as the legislated objective for superannuation:
Ensure that all working Australians, save for their retirement throughout their working life to achieve an adequate level of income throughout retirement.
This contrasts with the objective suggested by the Financial System Inquiry (FSI):
To provide income in retirement to substitute or supplement the Age Pension.
ASFA CEO Pauline Vamos said the organisation supports the FSI proposal, but also believes “that if narrowly interpreted, it could mean that superannuation only provides assistance up to the level of the Age Pension”.
“This would not be an acceptable outcome for the community and would fall well short of delivering on the social goals of the system.”
“Our alternative definition proposes that the system delivers adequate retirement outcomes with commensurate economic and social well-being, free from undue hardship.”
For adequacy ASFA notes that the OECD nominates a replacement income rate of 65% of pre-retirement income. However, “this should not be the sole measure, because the purpose of the system should not be to support that level of income replacement for very high earners”. The submission points to the ASFA Retirement Standard as an appropriate additional goal.
“Finally, we will need to do more than simply enshrining the objectives in legislation and requiring public reporting on how the future policy proposals are consistent with these objectives. While both these initiatives will be critical to guide policy-makers, regulators, industry and the community about superannuation’s fundamental purpose, we will also need to agree tangible measures of success and monitor progress against these.”
ASFA suggests several targets in the submission, including having less than 20% of retirees relying solely or almost exclusivity on the age pension, expenditure on the age pension and superannuation of less than 6% of GDP, an income replacement rate in retirement of more than 65% and at least 50% of Australian able to achieve a ‘comfortable’ retirement.
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