Federal Treasurer Jim Chalmers addressing the Conexus Financial Political Series breakfast on Monday morning in Sydney.

The Albanese government plans to legislate the objective of super to guide future policy and successive governments and prevent the erosion of the country’s $3.4 trillion pool of superannuation savings.  

“In 2023, we will try to end the super wars once and for all, and make sure that the future changes to the system are compatible with the main objective of super and doing that requires us to embed superannuation and its purpose into law,” he said at the Conexus Financial Political Series breakfast on Monday in Sydney, in partnership with BT.    

A clear objective of super will prevent unnecessary leakages in the system. The Morrison government’s superannuation early release scheme during the pandemic resulted in $36 billion in lost retirement savings which Chalmers said was conducted “without consultation and little consideration”.   

The government is proposing to define super as: “The objective of superannuation is to preserve savings and deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

Retirement focus 

Focusing on retirement will give super funds greater focus on how income is derived and assets are invested. “A sharper focus on delivering for members requires that funds always invest in a way that secures the right risk return profile,” Chalmers said.  

However, he conceded the industry and government had more work to do around the decumulation phase and retirement products. “We haven’t quite perfectly nailed the best set of choices for people in drawdown and… there’s been a reluctance about some of the products that have been available.”

With 3.6 million Australians retiring in the next 10 years, Chalmers said the use of digital tools as a means to offer scalable and affordable advice. “That’s where digital could help. If used well, with the correct consumer protections, it could offer new ways to provide high-quality, cost-effective advice at a larger scale,” he said.  

Treasury has released a consultation paper and the industry has until March 31 to make submissions.  

Industry endorsement 

Industry bodies including the Australian Institute of Superannuation Trustees, Association of Superannuation Funds of Australia, Council of Australian Life Insurers and the Financial Services Council as well as super funds such as HESTA endorsed the government’s move.  

Deborah Ralston, former panel member of the Retirement Income Review and guardian of the Future Fund, also welcomed the proposed definition and its emphasis on retirement income. “Most importantly super is to provide retirement income. It is not a nest egg, but to be used and drawn on in retirement. In order, to achieve this super needs to be preserved for this purpose,” she said.  

The proposal is an important step forward as it focuses on retirement income and recognises that super sits alongside government support, including the age pension said Mercer partner David Knox.   

He suggested using the term ‘purpose’ in place of ‘objective’ as purpose is the rationale for something to be done or create which is different from objective which is more goal-oriented.