On Monday, the Albanese government made progress on its election commitment to legislate an objective of superannuation with the release of a new consultation paper.
The government believes superannuation should preserve savings in an equitable and sustainable way to deliver income for a dignified retirement alongside government support.
The government’s efforts have received broad support, with the proposed wording deemed a step in the right direction by the Financial Services Council (FSC).
“The FSC supports the government’s commitment to legislate an objective for the superannuation system as a priority and recognises the final objective must reflect the expectations and aspirations of everyday Australians,” said CEO Blake Briggs.
“The next step will be examining the detail of the proposal to ensure it sets the right parameters to prevent policy tinkering that could undermine confidence in the superannuation system for the 16 million Australians who are doing the right thing by saving for their own retirement,” he noted.
Mr Briggs underlined that by establishing an objective of superannuation, the focus can shift to policy reform aimed at addressing systemic issues, such as including superannuation contributions in government-paid parental leave.
SMSF Association lends support to proposal
Peter Burgess, deputy CEO and director of policy and education at the SMSF Association, said the government’s decision to open up the proposed definition for public consultation is a positive step towards achieving this “critical recommendation”.
“Legislating the objective of superannuation will provide stability and confidence to policymakers, regulators, the industry, and the community that changes to superannuation policy will be aligned with the purpose of the system,” Mr Burgess said.
According to him, building consumer confidence is critical to supporting a retirement savings system that will deliver the necessary income for a dignified retirement.
“The concept of a ‘dignified retirement’ is something that the SMSF Association has long advocated, so we are pleased that this concept is now forming a central plank of the government’s proposed objective for superannuation,” he said.
“We look forward to working with the government to ensure the legislated objective achieves these important goals.”
Insurance ‘critical’ to dignified retirement: CALI
Welcoming the government’s consultation paper, the Council of Australian Life Insurers (CALI) said it believes that the economy and member outcomes are best served when super is underpinned by life insurance.
“Having insurance in superannuation means that Australians have a safety net when faced with major illness or disability,” commented CALI CEO Christine Cupitt.
“Insurance in superannuation can step in to meet their financial need first, which helps to protect superannuation balances and enable a dignified and financially secure retirement.”
CALI said that the life insurance industry was committed to contributing to efforts to create a more sustainable super system and indicated that it would be participating in the consultation.
“Insurance in superannuation is critical to ensuring Australia’s superannuation system is equitable and sustainable,” Ms Cupitt concluded.
Proposed objective an ‘inflection point’
Reacting to the proposed objective, the Association of Superannuation Funds of Australia (ASFA) described it as an inflection point in the evolution of the retirement income system.
“The proposed objective places preservation, retirement income, equity, sustainability and a dignified retirement at the heart of superannuation policy while recognising the ongoing role of the age pension,” commented ASFA CEO Martin Fahy.
“As the largest defined contribution pension system in the world, this objective offers a retirement aspiration which is fit for purpose, and worthy of our commitment to a future where all Australians can face into retirement with confidence.”
Moreover, Dr Fahy said the government has proposed an objective that can underpin much-needed policy stability and help anchor future policy debates.
‘Guiding light’ for future super policy
Similarly, while throwing its support behind the government, Industry Super Australia (ISA) suggested that a well-defined and legislated objective could be a “guiding light” for the development of future policy that seeks to protect and grow the retirement savings of all Australians.
“It’s a good proposal because it safeguards the future of working people and reflects what they already understand as super’s purpose — savings solely for their retirement,” commented ISA CEO Bernie Dean.
“It should help avoid another disaster of allowing people to tap into super early for any reason, which hurts everyone.”
ISA noted that the principles of preservation, equity, sustainability, and dignity, which are now encompassed in the objective, were absent from earlier attempts to legislate a goal.
“We look forward to working with the government to bring this to life in law so that workers have the best shot at a good life in retirement,” Mr Dean added.
Meanwhile, HESTA CEO Debby Blakey said enshrining an objective of super is “a vital foundation” on which to build a stronger super system that’s fairer for women and those earning lower incomes.
“This is such an important year; it’s a real fork in the road for our super system, as we have a real opportunity to ensure dignity in retirement is for everyone and not just the lucky few,” Ms Blakey said.
“The consultation period is an opportunity to come together and shape a stronger super system now, and for generations to come,” she stated.
‘Important and long overdue’ move, says AIST
Describing the move towards legislating an objective for super as “important and long overdue,” Eva Scheerlinck, the CEO of the Australian Institute of Superannuation Trustees (AIST), also said that the government’s proposed objective was “promising”.
“The definition recognises the centrality of preservation of superannuation benefits until retirement, equity in the system and the important role superannuation plays in providing a dignified retirement,” she said.
“These are the characteristics we are seeking to enshrine so that the system looks after the needs of all Australians, including women, lower-paid workers and vulnerable people.”
Ms Scheerlinck also pointed to the repercussions of the COVID-19 early-release scheme, which she said had damaged the retirement savings of thousands of members.
“Superannuation is for retirement, not a piggy bank to be opened when convenient, so legislating an objective will help to protect super from interference in future,” she concluded.
The government is consulting on the objective until 31 March.
Will this legislated objective define how retirees can use their fund once eligible? Is it the intention of future Government policy to limit super funds to just providing income and not lump sum access? This would be concerning to all those that have plans in place for anything in addition to providing income upon reaching retirement age.