SMSF Association sets out objective for superannuation

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legislated objective for superannuation, SMSF Association (SMSFA), submission, government, Financial System Inquiry (FSI)The SMSF Association has set out its view on a legislated objective for superannuation.

The Government has been consulting on what should be the objective of superannuation, to be put into legislation, following from a recommendation of the Financial System Inquiry.

The SMSF Association recommends the following primary objective for superannuation:

To provide income in retirement to substitute or supplement the age pension, delivering a financially secure and dignified retirement for Australians.

This compares to the objective suggested by the Financial System Inquiry (FSI):

To provide income in retirement to substitute or supplement the Age Pension.

“We have recommended the additional words to the FSI recommendation in order to ensure that the primary objective captures the idea that the superannuation system should be the primary savings vehicle to fund expenses in retirement, which is more aspirational than saving to merely replace the age pension,” said the SMSF submission.

“This links adequacy to the provision of retirement income which is crucial to the superannuation system delivering improved retirement outcomes for Australians.”

The FSI also called for regular reporting on meeting the legislated objective of superannuation. The SMSF Association agrees with the Inquiry that this should be done in the Intergenerational Report.

“The Intergenerational Report (IGR) would be an appropriate vehicle for a regular periodic review of the superannuation system to be tied to.”

“Having the IGR released once every five years will allow the Government, industry and consumers to take a ‘health check’ on the superannuation system.”

“We strongly suggest that the Government consider this review process being implemented as part of the enshrining of the objective of superannuation.”

The Association also says the objective of superannuation should be put in a separate piece of legislation.

“The objectives of superannuation will influence a number of policy areas including superannuation, taxation, social security, health and aging. Accordingly, the objective should be legislated in a standalone Act rather than in existing superannuation or taxation legislation.”

“Finally, we strongly encourage the Government to engage in further consultation on the wording of the objective and guiding principles before they are enshrined and also seek bipartisan support for the objective.”

“We believe that enshrining the objectives for superannuation is an important step in delivering stability and certainty and stress that this important task should be undertaken in an orderly and unhurried fashion.”

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