The superannuation system needs a “sustained period” of stability, preferably with changes as part of a rolling five year review process, says the SMSF Association.
The SMSF Association says that the lack of stability in the superannuation system is impeding the efficient deliver of retirement savings outcomes to members.
“The system needs a sustained period of stability free from significant changes, especially changes to taxation settings, to allow members to have confidence in the system and make long-term savings plans,” said SMSF Association CEO John Maroney.
Mr Maroney said it’s imperative for the Government to get industry consensus on the objective of superannuation – a Bill for which is still before the Parliament – and remove superannuation from the annual budget policy cycle.
SMSFA has been calling for superannuation policy to be removed from the budget cycle for some time, instead recommending it be reviewed every five years.
“Superannuation policy changes can then potentially be undertaken through a review of superannuation settings linked to the Intergenerational Report which is required under the Charter of Budget Honesty Act 1998 to be completed every five years and released by the Treasurer at the time,” said Mr Maroney.
“Having the Intergenerational Report released once every five years will allow the Government, industry and consumers to take a ‘health check’ on the superannuation system to see whether it is attaining its goals and whether any adjustments/changes to policy settings are required.”
The SMSFA has told the Productivity Commission, in a submission to the inquiry into the competitiveness and efficiency of the super system, that the political instability and ongoing changes to superannuation law has created a level of distrust and instability in the system.
“When superannuation changes occur at the whim of budget policy and when consistent tinkering occurs, these activities affect the public trust in superannuation that can lead to individuals becoming disengaged with the system.”
“They may withhold from making contributions and managing their superannuation savings in the most appropriate way for them (either in an SMSF or APRA-regulated fund) to maximise their retirement benefits.”
Maroney points to research released by the Association which shows that legislative change, and surrounding speculation, has resulted in many Australians losing confidence in the super system and reducing their super contributions.
“We think there is a clear message in these reports. Constant changes to the superannuation system undermine confidence and will hinder the system achieving its primary objective – to provide income in retirement to substitute or supplement the age pension, delivering a financially secure and dignified retirement for Australians,” he said.