FPA, AFA critical of proposed objective of super for prioritising government over people

The federal government revealed its proposed definition of the objective of superannuation in February, which aims to “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 that Labor aimed to rectify the absence of a defined objective for superannuation in legislation, given its critical function in the retirement system.

“We need to change that,” the pair 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.”

In a submission to the government’s consultation on the objective of super, published this week but submitted prior to the merger of the two bodies, the then Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) stated that the proposed objective inadequately represents the ownership of Australians’ earnings in the super system.

“Government appears to be at the core of the proposed objective,” the submission said.

“However, Australians view superannuation as their money, their superannuation account, deducted from their income, which they were required to defer receiving from when they were working until their retirement.”

Reiterating the sentiment that members be placed at the centre of the objective, the bodies added that the objective of super should be to “guide government and regulators to act in the best interests of Australians in forming policy and regulations for the superannuation system”.

“At the fore of this must be recognition that the government are gatekeepers of Australians’ money and that consumers have, in good faith, contributed to the super system to save for their retirement,” the submission said.

“The objective of super must ensure the system cannot be used for political purpose or gain.”

The FPA and AFA also took issue with the phrasing of “preserve savings” in the government’s definition, assessing that the term “preserve” has a specific meaning within the superannuation system.

“Preserve, preserved, preservation, and other like terms, all refer to money in superannuation savings that must be kept in a super fund until a condition of release occurs — e.g. accessing funds after retiring or reaching ‘preservation age’,” the submission said.

“This is industry jargon and not commonly understood by users of the system.”

The bodies said changing the phrasing to “protect savings” would clarify the objective for Australians.

“Our associations recommend the use of the all-encompassing phrase ‘to protect savings’. The term ‘preserve’ should not be included in the objective of super and should be replaced with ‘protect’,” they said.

In order to solidify the objective’s focus on Australians, and not the government, the FPA and AFA also proposed moving away from the term “members”.

“The objective must include a clear statement about the owner of the money held within the superannuation system and that must be the Australian consumer,” the submission said.

“The term ‘members’ is industry jargon that is not always readily understood by consumers. The FPA and AFA recommend ‘Australians’ is an appropriate reference for the owners of the savings held within the superannuation system. For example, ‘to protect Australians’ savings’.

“Importantly, this helps to emphasise the fact that the super system exists for the benefit of Australians, who are the consumers of the superannuation system.”

The government’s consultation on the objective of super closed on 31 March.