The primary objective for superannuation should be “to provide income in retirement to substitute or supplement the Age Pension, delivering a financially secure and dignified retirement for Australians”.
This is the definition of superannuation that the SMSF Association wants enshrined in legislation following the Federal Government’s decision to accept the Financial System Inquiry’s (FSI) recommendation and legislate on the primary objective for Australia’s retirement income system.
Association CEO/Managing Director Andrea Slattery says: “We are pleased that the Government is moving forward with the process of enshrining the objective of superannuation in legislation. It’s an important step that will help give the system stability.
“It’s the Association’s firm belief that the objective for superannuation should be based around the provision of retirement income, as recommended by the FSI, and supported by a set of guiding principles that can be used to give context to the primary objective.
“It is essential that the objective not only has a focus on providing retirement income, but also ensures that retirees are able to build adequate retirement savings through the superannuation system to manage the financial risks of ageing and retirement.”
“Ensuring that retirees have the opportunity to build adequate retirement savings is key to the superannuation system delivering better retirement outcomes for Australians.”
Slattery says the Association strongly recommends that enshrining the objective of superannuation should be stand-alone legislation.
“The objectives of superannuation will influence a number of policy areas including superannuation, taxation, social security, health and aging. Accordingly, the objective should be legislated in a stand-alone Act rather than in existing superannuation or taxation legislation.
Slattery wants the Government to engage in further consultation on the wording of the objective and guiding principles before they become law, and to seek bipartisan support. “We believe that enshrining the objectives for superannuation is an important step in delivering stability and certainty and stress that this important task should be undertaken in an orderly and unhurried fashion.”
The Association says this legislative process provided an “appropriate opportunity” to remove superannuation policy from the annual Budget cycle by limiting significant changes only after a comprehensive, long-term review of the system.
“The Intergenerational Report (IGR) would be an appropriate vehicle for a regular periodic review of the superannuation system to be tied to.
“Having the IGR released once every five years will allow the Government, industry and consumers to take a ‘health check’ on the superannuation system, and stakeholders can assess whether it is achieving its goals and whether any adjustments/changes to policy settings are required.
“The Government should strongly consider this review process being implemented as part of the enshrining of the objective of superannuation,” she says.
