Statements of compatibility with the objective of superannuation will be required for super legislation and regulations, if the Superannuation (Objective) Bill 2016 is passed as drafted.
The Government has released draft legislation for some of the changes to superannuation announced in the 2016 Budget, along with the objective of superannuation.
The objective of superannuation, as set out in the draft is:
The primary objective of the superannuation system is to provide income in retirement to substitute or supplement the age pension.
Though the draft Bill also says:
To avoid doubt, this section does not affect the meaning of any law of the Commonwealth (other than this Act).
The Government has also identified five ‘subsidiary’ objectives of superannuation, which are included in the draft Explanatory Memorandum but not the Bill:
- facilitate consumption smoothing over the course of an individual’s life;
- manage risks in retirement;
- be invested in the best interests of superannuation fund members;
- alleviate fiscal pressures on Government from the retirement income system; and
- be simple, efficient and provide safeguards
When a Bill relating to superannuation is introduced to the House of Representatives, or regulations relating to superannuation made, a ‘statement of compatibility’ must be prepared which includes an assessment of if the bill or regulation is compatible with the objective of superannuation.
Setting an objective for superannuation in legislation was a recommendation of the Financial System Inquiry (FSI). Indeed the objective in the draft legislation is very similar to that proposed in the FSI final report: “To provide income in retirement to substitute or supplement the Age Pension”. However the final report also said: “The Inquiry recommends greater reporting by Government on how policy proposals better fulfil the objectives of the system over the long term”. The FSI raised the option of a stand-alone report or including such reporting in the Intergenerational Report. However this recommendation does not appear to have been taken up by the Government.