The Institute of Financial Professionals Australia (IFPA) has rejected the proposed objective of superannuation the federal government has put forward to have enshrined in law.
In stating its position on the matter, the industry body confirmed it is in favour of achieving consistency in retirement savings system policy, but could not support the objective of superannuation as contained in the Labor Party’s consultation paper about the matter.
IFPA superannuation technical and policy committee chair Phil Broderick said he failed to see how legislating the objective of super would achieve any purpose as the government would not be bound by it and could completely disregard it.
“What is the point of a measure that future governments could ignore or fails to require any formal consideration from future governments, such as a compulsory statement of compatibility around how any new superannuation legislation aligns with the new objective. But even if such a statement was required, it could end up being a tick-the-box exercise that would not prevent future changes,” Broderick noted.
He pointed out the wording the government is currently proposing is so broad that it opens it up to interpretation and manipulation by future governments.
“For example, a ‘dignified retirement’ means different things to different people depending on the lifestyle to which they are accustomed. Further, whether the superannuation system is ‘sustainable’ may be subject to the broader budgetary and fiscal position of the commonwealth at any given time,” he noted.
According to Broderick, the objective as proposed could end up achieving the exact opposite outcome to what it purports to represent.
“We fear the objective might be used as a sword by policymakers so that once you’ve reached the level that the government thinks is enough superannuation for a ‘dignified retirement’, then anything above that is fair game. This can be seen by the government’s newly proposed tax on superannuation balances above $3 million,” he said.
IFPA head of superannuation Natasha Panagis suggested there is no need to formulate a new objective of superannuation as one already exists in law and perhaps could be fine-tuned to allow the government to achieve its goal.
“In our view, the core objective of superannuation is better captured by the sole purpose test, which simply requires that superannuation funds are maintained for the purpose of providing retirement benefits to its members or to their dependents if a member dies before retirement,” Panagis noted.
“As the sole purpose test already exists, it could be revisited to tighten up existing preservation rules if access to superannuation is currently thought to be ‘too easy’. This will ensure we have a more targeted measure that stops access to early-access schemes.”
She also expressed her concern that the objective of super currently proposed is happening in isolation without taking into account the three key pillars of retirement, being the age pension, the super guarantee levy and voluntary savings.
