The federal government will seek input on what the objective of superannuation should be, while putting forward its proposed definition, which focuses on ensuring super is used for retirement only while generating income for that stage in life.
Treasurer Jim Chalmers announced the government would be consulting on the objective and released a consultation paper stating: “The objective of superannuation is to preserve savings and deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
The paper noted the aims of the objective were to restrict access to superannuation savings for retirement only and that it should generate an income that creates financial security, in conjunction with the age pension, where similar outcomes are provided for people in similar circumstances.
“Despite its central role in the retirement income system, there is no agreed objective of superannuation, legislated or elsewhere, to serve as a guide for policymakers, government, regulators, industry and the wider community,” Chalmers said.
“Legislating an objective for super, a Labor commitment at the last election, will give confidence to the super industry and peace of mind to Australian workers that we’ll do everything we can to safeguard their savings to deliver income in retirement.”
The consultation paper stated the objective of superannuation would be established in legislation “to ensure the stability of the objective and provide certainty to regulators, policymakers and government of the longevity of the objective” and it may be part of a new stand-alone act or added to existing super legislation.
“The objective would be forward looking and could be used as a common yardstick to consider prospective policy changes to the superannuation system,” the paper added.
“It is not intended to impact regulatory supervision activities and while aligned with, it would be separate from, trustees’ fiduciary duties such as the best financial interests duty and the sole purpose test.”
The government’s announcement to take action on the objective for superannuation was supported by the SMSF Association, with deputy chief executive and director of policy and education Peter Burgess noting the industry body had supported the idea since it was first recommended by the 2014 Financial System Inquiry.
“The concept of a ‘dignified retirement’ is something that the SMSF Association has long advocated, so we are pleased that this concept is now forming a central plank of the government’s proposed objective for superannuation,” Burgess said.
Financial Services Council chief executive Blake Briggs also welcomed the consultation on a definition and noted the objective must reflect the expectations of Australians.
“The next step will be examining the detail of the proposal to ensure it sets the right parameters to prevent policy tinkering that could undermine confidence in the superannuation system for the 16 million Australians who are doing the right thing by saving for their own retirement,” Briggs said.
Association of Superannuation Funds of Australia chief executive Martin Fahy said: “As the largest defined contribution pension system in the world, this objective offers a retirement aspiration which is fit for purpose and worthy of our commitment to a future where all Australians can face into retirement with confidence.
“Thirty years on from the introduction of the superannuation guarantee, this proposed objective opens the next chapter in the Australian superannuation story.”