The federal government’s intention to enshrine the purpose of superannuation in law is likely to prove problematic due to the process already put in place to achieve this aim, according to a retirement savings expert.
Speaking at the selfmanagedsuper SMSF Trustee Empowerment Day 2016, Miller Super Solutions founder Tim Miller identified the starting point for the process, being “to provide income in retirement to substitute or supplement the age pension”, as the source of the challenging issues the industry was likely to encounter in the immediate future.
“My great concern with that statement is there’s a lot of difference between supplementing something and substituting something,” Miller said.
“No one has an issue with the substituting superannuation for the age pension. Where the issues tend to arise is once we start to talk about supplementing the age pension; it’s about what’s acceptable.
“This is where the issues have arisen because you then start to debate how much money is too much money and how many concessions should we be able to provide.”
He added the way the current legislation stood there might have been no need to attempt to enshrine the purpose of superannuation in further legislation.
“Since 1994 effectively, when the superannuation act was enacted as we currently know it, we’ve had a test, and it is called the sole purpose test. So we’ve always had what the purpose of superannuation is and that is to provide benefits to a member in their retirement or upon attaining preservation age,” he noted.
“There are also additional purposes if members die, if they pass away, need to be able to pay benefits to their beneficiaries.
“So that is what sits there under the sole purpose test, but what they’ve done now is effectively said we need to redefine or additionally define what the purpose is.”
Further, he said the government was undervaluing the purpose of superannuation by using the statement incorporating the age pension as a starting point.
“But everyone seems to agree on this ‘purpose’ thing, so I think we just have to accept this is here to stay,” he said.