The Institute of Financial Professionals Australia (IFPA) has again rejected the proposed objective of superannuation the government has put forward and maintained its opposition to having to legislate an official purpose for the country’s retirement savings.
The industry body has stated this position is the same as the one it held in March when it made a submission to government regarding this subject and further noted since the draft Superannuation (Objective) Bill 2023 was released, it now has fresh concerns over the proposal.
“In our view, the key words ‘equitable’ and ‘sustainable’ could be a flag post for future changes to the superannuation system. The exposure draft legislation wording strongly implies that the sustainability of the superannuation system will be subject to the broader budgetary and fiscal position of the commonwealth at any given time,” IFPA head of superannuation and financial services Natasha Panagis confirmed.
“The proposed objective is loaded with terms that are open to interpretation or manipulation by current and future governments. Such broad wording will still enable policymakers to use the proposed objective to make the overall superannuation system less generous to individuals planning for their retirement.”
Panagis pointed out the draft legislation has effectively given the government the opportunity to make further changes to the superannuation framework from a taxation perspective, specifically through the inclusion of the inference “policymakers will need to weigh the cost of tax concessions when assessing future superannuation policies against the objective of superannuation”.
“The objective should not operate as a mechanism to allow the government to make continued changes or act as a means to justify the short-term policy and fiscal objectives they wish to achieve at that moment in time at the expense of investor confidence,” she said.
While backing the inclusion of a statement of compatibility, she raised worries it could be completely ineffective in a practical sense.
“In the end, if the objective is legislated, there will be an obligation to prepare and lodge a statement of compatibility, but it will not be binding on current or future policymakers, governments, courts or tribunals,” she said.
“It will provide no rights and will have no consequences for failure to comply with that obligation. In other words, the legislation will be ineffective for everything due to its lack of enforceability. As such, we believe legislating the objective will not achieve any real purpose.”
According to Panagis, the existing sole purpose test already achieves the goal for which Canberra is aiming.
“If an objective is needed, it should be based around the existing sole purpose test as it already contains an excellent legislated purpose. In our view, the core objective of superannuation is better captured by this existing test as it requires that superannuation funds are maintained for the purpose of providing retirement benefits to its members or to their dependants if a member dies before retirement,” she noted.
Finally, she criticised the narrow focus the process seems to have adopted.
“Any legislated superannuation objective aimed at influencing policymakers moving forward must be considered in the context of the overall retirement income system encompassing the other pillars – it should not be formulated in isolation,” she noted.