This is a submission to the Senate inquiry into the Bill to set a legislated objective for superannuation.
Thank you for the opportunity to make a submission in relation to the Superannuation (Objective) Bill 2016.
This submission will deal with three issues: the need for broad support for the objective before it is set in legislation, long-term reporting on meeting the objective for superannuation and that both the primary and subsidiary objectives for superannuation should be set in legislation.
A legislated objective for superannuation could be a useful tool setting the direction of policy to achieve retirement goals, or it could be an empty phrase – either ignored or changed to suit the whims of the day. Based on the development of the objective so far it appears the latter is much more likely.
Objective of superannuation should have broad support
The Financial System Inquiry, in its final report, recommended that “broad political agreement” be sought for the legislative objective for superannuation, however this does not appear to have been achieved for the proposed objective.
Recent statements by senior members of the Labor Party indicate that there is not bipartisan support for the objective as currently drafted. In November Chris Bowen told the House of Representatives: “So we should have a bipartisan agreed objective. I am sorry to say that, at the moment, we do not.”
“The objective that the government announced is not bipartisan and has not been agreed with us and will not meet with our support. If the government wants to continue those discussions which the minister and I had before the election, I am very open to that idea. I think we could reach a bipartisan objective for superannuation. That would be better. But we are not simply going to sign up to an objective which the government decides and which we think could be improved and which many in the sector think could be improved.”
There is also a view in the superannuation industry that the objective does not go far enough, particularly in terms of adequacy, and is flawed by so strongly linking superannuation to the Age Pension. Failing to reach broad support for the objective risks that it will be amended in the near future, undermining the objective.
Reporting on the objective of superannuation
In addition to the Statements of Compatibility with the objective of superannuation the Superannuation (Objective) Bill 2016 should include longer-term reporting on meeting the objective, as recommended by the Financial System Inquiry (FSI).
The FSI final report said: “In addition, Government could periodically assess the extent to which the superannuation system is meeting its objectives. This could be done in a stand-alone report or as part of the Intergenerational Report, which is prepared every five years.”
I also encourage the Parliament to consider regular reporting on meeting the objective of superannuation. However I think this should be more frequently than the Intergenerational Report, as superannuation policy changes quicker than demographic trends.
Primary and subsidiary objectives for superannuation should be set in legislation
The subsidiary objectives for superannuation should be included in the legislation, not set by regulation.
According to the Explanatory Memorandum the proposed subsidiary objectives are:
● 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.
These are important objectives and changing them should be done by Parliament, not simply through regulation.
I note that an exposure draft of the Superannuation (Objective) Regulation 2016 is currently subject to consultation, and that the wording of the objectives in this proposed regulation is slightly different than those in the EM.
This is a submission to the Senate Standing Committee on Economics into the Superannuation (Objective) Bill 2016 by SolePurposeTest writer Luke Smith, it has been published here with permission, he retains all copyright.