The Labor government’s plan to legislate the purpose of superannuation and end all further debate is very presumptuous. When he revealed the single sentence that will sum up super’s objective back in February, the Treasurer was basically calling off any further discussions on the matter. The fact that the consultation process ended on 31 March is merely a formality.
Chalmers is basically saying: “We’ve figured it out guys! We’ve got it. No need to debate this any further. The objective of super is to preserve savings and deliver income … kay? For a dignified retirement — got it? Alongside government support … in an equitable and … sustainable … way … see?”
The plan is to get this enshrined in law and have it become a “common yardstick” to beat the hell out of any future dissenters.
“The objective would be forward-looking and could be used as a common yardstick to consider prospective policy changes to the superannuation system,” the paper reads. “For example, how a proposed policy does or does not meet the legislated objective could be raised as part of consultation on policy or draft legislation.”
To think that the objective of superannuation can be defined once and for all in 2023 is foolish. It is also incredibly arrogant.
Superannuation means different things to different people. There are as many objectives of superannuation as there are working age Australians with super accounts. Superannuation is an individual thing, how we feel about it is personal and what we intend to use it for is also personal.
But Chalmers has been vocal about the role superannuation can play beyond retirement. He told an industry event in Sydney back in February that “we need productivity-enhancing investment — in climate and energy, housing, the digital revolution and more”.
Elsewhere, he has stated that he would like to “elevate and broaden” the social role of superannuation.
It’s comments like these that will irk those who don’t wish to see their super used for anything more than funding their own retirement.
Not all Australians care about the ethics of their investments. I recall a conversation years ago with an independent financial adviser. We were discussing the benefits of managed accounts. When I suggested that investors could use an SMA to create an ethical portfolio, he offered that a growing number of his clients are using them to contain collections of sin stocks, mostly mining, gambling, adult entertainment, and deadly weapons.
When I asked who would want to build a portfolio of unethical investments, he answered my question with a question: “What is unethical?”
He had a point.
Financial advisers know better than anyone how personal retirement savings are to Australians. Their entire value proposition is based on providing personal advice.
In a submission to the government’s consultation on the objective of super, published last week but submitted prior to the merger of the two bodies, the then Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) stated that the proposed objective inadequately represents the ownership of Australians’ earnings in the super system.
“Government appears to be at the core of the proposed objective,” the submission said.
“However, Australians view superannuation as their money, their superannuation account, deducted from their income, which they were required to defer receiving from when they were working until their retirement.
“The objective must include a clear statement about the owner of the money held within the superannuation system and that must be the Australian consumer,” the submission said.
It is pretty straightforward, n’est-ce pas? Super is forced (or encouraged) sacrificed current income, deferred for future spending. The trade off is tax concessions. The rest is just detail around how much and to whom.
I could not agree more. Fifteen years ago I said that superannuation will eventually be used by governments as a defacto source of infrastructure funding until it morphs into government rather than private.
Nice ideological rant. But the fact is super is not and has never been whatever you want to be. Going back as far as the Henry and Murray reviews, the call has been for the government to legislate a purpose for super to stop it being used as a tax shelter by the rich and for estate planning. Super is heavily subsidised through tax expenditures so the public through its elected representatives has a total right to stipulate how much public largesse should be spent on it. If your clients want to do things with their super other than save for retirement, they can do so outside the tax structure that is superannuation. In the meantime, there needs to be a limit to the amount of incentive the tax system supplies to people who don’t need it.
The inclusion of the words ‘to provide an income in retirement’ is enough for me, given Labor’s 2019 platform of denying franking credits alongside shutting down negative gearing, to see the plan is to replace not enough Gen Zs and millennials as taxpayers post implementation of the still currently expected Stage 3 tax cuts, with very aged baby boomers in retirement. Magically, the budget deficits envisaged resulting from the cost of massive boomer aged care, will disappear! Tax super pensions then, as ordinary income and the magic happens.
The Objective of Super is not for the industry, it is to (supposedly) guide legislators. The Regulator also doesn’t need an Objective for Super. Participants in the super system comply with the law, as legislated, Regulators just enforce the law, as legislated. How it gets to the legislated state is for Treasury and the parliament.
This is more about the ideological wars between the ALP and NLP re super. After 30 years, we all know what the sole purpose of super is, its the politicians that seem to have some requirement for prescription.
Superannuation is not the only type of retirement savings. There are plenty of other ways people can and do save for their retirement. Those methods can be as personal as they wish.
The difference with superannuation is that it is concessionally taxed. Responsible governments have every right to impose restrictions in return for those tax concessions. They also have the right to limit the generosity of those tax concessions.
However responsible government means doing what’s best for the whole of society. Not doing what’s best for union officials and the “Industry” super funds they control.
Isn’t the purpose of super already clearly stated in the sole purpose test?
Socialism – heaven for ruling class bureaucrats who believe they know better taking control of your money?
In my mind, the purpose of Super is – it is my money, earnt legally so leave it alone – or scrap the compulsory system. There would be many people pay tax in accumulation when they could potentially be better off with alternative strategies?