Readers of my past editorials will know one of my greatest frustrations with the current superannuation system is the lack of discipline of our elected officials to leave the pool of money from the compulsory savings scheme alone.
Time and time again they’ve shown an all too ready instinct to go after the $2 trillion sitting in the retirement savings reserves of the nation to help balance the budget because it’s been so easy for them to do so.
But perhaps March heralded a ray of light that might indicate the worm has turned on this subject.
In March, the government released a discussion paper, entitled “The objective of superannuation”, designed to initiate the consultation process to have the purpose of super enshrined in legislation.
This move comes on the back of the Financial System Inquiry (FSI) recommendation to do so and naturally uses the definition David Murray’s panel suggested as a starting point. That is, “to provide income in retirement to substitute or supplement the age pension”.
Since the announcement, many of the industry bodies have declared their stance on the issue, be it about the definition itself or how the enshrinement will be brought about.
For example, the SMSF Association has called for the objective of superannuation to be enshrined in stand-alone legislation and not be washed into the existing super or taxation laws.
The SMSF Owners’ Alliance on the other hand has challenged the FSI’s suggested objective as too limited or vague. It fears this description implies the age pension is the nucleus of the retirement system and superannuation is just a supplemental component.
No doubt we’re going to see more and more divergent views throughout the process, but there is one glaringly obvious element that has not been included in the proposed objective.
Nowhere does it say either explicitly or by implication that superannuation exists as a fiscal safety net for the government in case there is a budget deficit in desperate need of repair.
This is important and hopefully it will mean future governments will be forced to consider the eventual legislation before any new policies regarding the retirement savings system, especially concerning the taxation of superannuation, are proposed.
Naturally there are no guarantees in life, so just to make sure the right outcomes are arrived at, perhaps an additional measure is needed.
To this end the SMSF Association has formulated one of the more sensible proposals I’ve seen or heard in a long time.
During a panel session at its 2016 national conference and included in its enshrinement of super discussion paper submission is the proposal to detach superannuation policy from the short-term budget cycle and instead have it linked to the review and assessment process of the Intergenerational Report.
It would mean superannuation policy would then be reviewed once every five years rather than every year during May – often enough for medium objectives to be achieved with a level of infrequency to take away the constant chopping and changing of the rules that have been far too common.
Even if the SMSF Association’s proposal doesn’t get up, these developments should encourage the government to follow the strong advice Michael Jackson espoused in his megahit “Billie Jean” – “just remember to always think twice” – before amending superannuation policy.
