Government defines super, launches consultation on objective

The government has issued a new consultation paper seeking feedback about the benefits, phrasing and implementation of an objective for superannuation.

Released on Monday, the paper sets out the Albanese government’s proposed definition of the objective, which is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

In an accompanying statement, Treasurer Jim Chalmers and Minister for Financial Services Stephen Jones said: “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 policy makers, government, regulators, industry, and the wider community.”

“We need to change that. 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.”

According to the consultation paper, ‘preserve savings’ has been included in the proposed objective to make clear that contributions to super should not be accessed unless for the purpose of income in retirement, “apart from exceptional circumstances”.

“This recognises that superannuation exists first and foremost as a savings vehicle to fund retirement and not a pool of individuals’ savings to meet other lifetime costs,” the paper reads.

Meanwhile, ‘deliver income’ has been included to capture what is said to be the purpose of the super system: “to provide universal savings that are then drawn down in retirement to deliver income that support retirees’ standards of living”.

“The focus on delivering income makes clear that the purpose of superannuation is not for minimising tax on wealth accumulation or enabling retirees to leave tax-effective bequests.”

The paper suggests that ‘equitable’ captures the importance of a system that delivers similar outcomes to people in similar situations and targets support to those most in need, while ‘sustainable’ signifies that the system should be robust to demographic, economic and social change, and should be cost-effective for taxpayers in achieving retirement outcomes.

“While all Australians can save for their desired lifestyle in retirement, this outcome is influenced by personal circumstances and expectations, and is ultimately constrained by the need for equity and sustainability in the system,” the paper reads.

“Beyond a certain level of income, additional government support through tax concessions is not necessary or appropriate.”

Dr Chalmers and Mr Jones said that, given the increasing number of Australians who are entering retirement age, there needs to be a greater focus on how the nation’s super system is delivering strong retirement outcomes.

They also noted that super is an increasingly important source of capital in the economy and the significant scale of Australia’s super system contributes to the strength of financial markets through capital deepening.

“There is a significant opportunity for Australia to leverage greater superannuation investment in areas where there is alignment between the best financial interests of members and national economic priorities, particularly given the long‑term investment horizon of superannuation funds,” Dr Chalmers and Mr Jones said.

“For these broad benefits of superannuation to be maximised, it’s critical for there to be a clear, shared understanding of the objective of superannuation. Legislating an objective for super is about instilling greater confidence in the system for generations to come.”

In its consultation, which will run until 31 March, the government is seeking stakeholder feedback on the framing of the draft objective, including its benefits and practical application.

Specifically, the consultation paper asks what stakeholders view as the practical benefits or risks associated with legislating an objective and whether the proposed objective meets their understanding of the actual objective of the super system.

Furthermore, the paper asks whether the government’s proposed approach to enshrining the objective in legislation is appropriate and if there are any other ways it could be enshrined.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.