Compulsory superannuation in Australia was introduced over 30 years ago and has been a true success story. However, the absence of an objective for the system has brought challenges – especially given it was initially developed in an era when the Australian superannuation industry was very different from what it is today.
The government’s consultation paper on Legislating the Objective of Superannuation, has provided the community with the opportunity to reflect on the past 30 years and look to improve our well-respected retirement income system.
The current proposal is: “The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
While there is much to like about the proposed, relatively succinct wording, there are some improvements that can be made.
Purpose vs objective
Purpose and objective are related concepts but they have distinct meanings. The main difference between purpose and objective is that purpose refers to the underlying reason or motivation for doing something, while objective refers to a specific and measurable goal that one wants to achieve.
In other words, purpose is the “why” behind a particular action or project, while objective is the “what” that one wants to accomplish.
In the context of superannuation in Australia, “purpose” is a much more appropriate term, particularly as an objective relating to retirement income may vary considerably between individuals.
A range of benefits and services
It’s important the Explanatory Memorandum, which will accompany any legislation to Parliament, recognises that superannuation funds provide a range of benefits and services that go beyond the provision of retirement income benefits.