Superannuation must be detached from the short-term budget cycle and instead linked to a review and assessment process, such as the government’s Intergenerational Report, in order to minimise frequent changes to the system.
SMSF Association head of policy Jordan George said enshrining the objectives of superannuation in legislation was an admiral goal, one which was also backed by federal Treasurer Scott Morrison and federal opposition financial services and superannuation spokesman Jim Chalmers at the SMSF Association 2016 National Conference in Adelaide last week.
“But what I wonder about is what is the practicality of having some very high-level statements in law stopping governments raiding super to fill holes in the budget,” George said during a conference panel session on Friday.
“I think the more important thing in setting the objective is actually trying to remove superannuation policy decision-making from the budget cycle.
“That’s why we [the SMSF Association] have recommended that a more appropriate way to make superannuation policy decisions is to maybe link it to something like the Intergenerational Report, which is published every five years.
“So every five years you can have a stocktake: stop, have a look at how the system has been performing for the last five years, do we need to tweak it, does it need adjusting. If yes, let’s do that now. And so super is not used to fill revenues or fill holes in the budget.”
By limiting super changes to five-year periods, Australians would have a lot more certainty with their retirement planning, he said.
“And you could really [get the message across] that super is not part of the budget cycle,” he said.
“Super is a tax construct, let’s be honest. So it’s always going to be tweaked around the tax side of it more than anything and that’s always going to be of interest to the government.
“So if we take it out of the budget cycle, I really think that’s where we can achieve some stability.”
Craig Emerson Economics managing director and former Labor minister Craig Emerson said he believed agreement could be achieved across the table among political parties on the five-year review.
“It mightn’t seem so, but politicians are acutely aware of the dangers of fiddling with superannuation every budget,” Emerson said.
“Like the Intergenerational Reports, you recheck the sustainability of the system every five years, but in the meantime you leave it alone.”
SMSF Association chief executive Andrea Slattery said recent speculation that poorly paid Australians might be allowed to opt out of compulsory super simply highlighted the need to establish bipartisan agreement on the long-term objectives of super and to enshrine them in legislation.
Slattery said exempting the low paid from the super system was a poor, short-term policy option that would have long-term, negative consequences.
“If we establish the long-term objectives for super, which universality would be one, then it would go a long way to prevent super being seen as a Pandora’s box for every idea that comes along,” she said today.
“Until we enshrine the objectives of super, governments will still tinker around the edges of super to solve a range of policy issues and fail to appreciate that super is a genuine, long-term retirement savings vehicle to give people security and dignity in retirement.”
She said the notion that small amounts of income had a negligible impact on a person’s long-term retirement savings outcome revealed a lack of understanding about compounding.