The SMSF Association has told the Productivity Commission the lack of stability in super is an impediment to the efficiency of a system that can deliver the best retirement savings outcomes for fund members.
“The system needs a sustained period of stability, free from significant changes, especially changes to taxation settings, to allow members to have confidence in the system and make long-term savings plans,” SMSF Association chief executive John Maroney said today.
In order to achieve this critical outcome for the system, it was imperative for government to get industry consensus on the objective of superannuation and to remove super from the annual budget policy cycle, Maroney said.
In the association’s submission to the Productivity Commission Superannuation Issues Paper, Maroney highlighted that the objective for the super system should be based around the provision of retirement income, as recommended by the Financial System Inquiry, and supported by a set of guiding principles that can be used to give context to the primary objective.
“It is essential that the objective not only have a focus on providing retirement income, but also ensures that retirees are able to build adequate retirement savings through the super system to manage the financial risks of ageing and retirement,” he said.
The association has long advocated removing super policy from the annual budget policy cycle to promote stability, competition and efficiency for the system.
“Superannuation policy changes can then potentially be undertaken through a review of super settings linked to the Intergenerational Report, which is required under the Charter of Budget Honesty Act 1998 to be completed every five years and released by the Treasurer at the time,” Maroney noted.
“Having the Intergenerational Report released once every five years will allow the government, industry and consumers to take a ‘health check’ on the system to see whether it is attaining its goals and whether any adjustments or changes to the policy settings are required.”
In its submission, the association also stressed political instability and ongoing change to super laws have created a level of distrust and instability in the system.
“When super changes occur at the whim of budget policy and when consistent tinkering occurs, these activities affect the public trust in super that can lead to individuals becoming disengaged with the system,” Maroney said.
“They may withhold from having contributions and managing their super savings in the most appropriate way for them – either in an SMSF or Australian Prudential Regulation Authority-regulated fund – to maximise their retirement benefits.”
Furthermore, the association’s “2015 Intimate with Self-Managed Superannuation Report” and a Vanguard/Rice Warner survey have revealed high adviser and trustee concerns about the impact of regulatory and legislative changes.
“We think there is a clear message in these reports,” Maroney said.
“Constant change to the super system undermines confidence and will hinder the system achieving its primary objective – to provide income in retirement to substitute or supplement the age pension, delivering a financially secure and dignified retirement for Australians.”
