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Seniors call on government to rethink super objective

More than 30 years since the launch of the superannuation guarantee, the government is still working out who and what super is for. National Seniors says it can do better.

The Federal Government is consulting the public on legislating the objective of superannuation. The hope is that this will provide a shared direction for government, the superannuation industry, and all Australians.

The government’s draft objective of superannuation is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

In explanatory notes, Treasury says the “objective does not alter superannuation trustee’s existing obligations or how members’ money can be invested or accessed, but it does serve as a reminder to them of their role in the super system, including to support members holistically during their working life, and their transition to retirement”.

Speaking on ABC Radio National’s Saturday Extra program recently, Jeremy Cooper, the former Deputy Chair of the Australian Securities and Investments Commission (ASIC), questioned the need to state the object of super.

Mr Cooper, who is also former chairman of Retirement Income at Challenger and chaired the 2010 Federal Government Review into Super, said it seemed “like an odd question”.

“Indeed, 30-odd years ago – and I'll call out one specific instance when the legislation creating compulsory super was passed in 1993 – Treasurer John Dawkins tabled a report that was called Security in Retirement: Planning for Tomorrow Today.

“When you read that document, it seems obvious that the people involved in writing it that knew exactly what super was for. They’d be somewhat bemused that here we are 30 years later defining a purpose.”

The politics

The reason for this, Mr Cooper says, is “all about politics”.

“The vast sum of money in super has become more and more contested,” he said.

“It should be doing this, it should be doing that; people should be able to access it for housing and so on. And so, what this purpose does is gives super some sort of direction to point in.”

National Seniors submission

As the peak consumer body representing the interests of older people, National Seniors Australia has made its views plain in a submission to Treasury.

Our commitment is to ensuring superannuation operates effectively for current and future generations.

While we support the intent of defining an objective for superannuation, we believe the proposed objective is flawed and is not in the public’s best interests or what the public wants from super.

Our key objections

1. By using the phrase “preserve savings”, the proposed objective neglects accumulation as a fundamental part of the superannuation system. There are no savings without accumulation.

The objective focuses too much on the end use of superannuation.

Many people draw on super earlier due to life circumstances. A superannuation objective should be flexible enough to accommodate diversity of life course and circumstance. For example, in some cases, people need to access their superannuation before they reach preservation age in situations of ill health.

2. Using the word “retirement” overemphasises a linear life course and reinforces the view a person’s adult life can be split into work and retirement.

People withdrawing superannuation over the preservation age of 60 (whether eligible for the Age Pension or not) may still be working (or providing informal care to others).

Many people continue to work while receiving a portion of their superannuation via a transition to retirement to boost their overall income and standard of living.

The word retirement is at odds with the need to retain workers and boost workforce participation because it reinforces the view older people should not continue in the workforce (reinforced by our punitive pension rules).

3. The term “income” represents a narrowing of the interpretation of superannuation.

People want the flexibility to use their super to either provide a regular income stream or lump sum payments. This gives people greater choice when managing their affairs in later life. Lump sums are useful when purchasing large consumer items such as a vehicle, caravan, home modifications, solar panels, holidays, or white goods.

Alternative wording

We have submitted an alternative superannuation objective: “The objective of superannuation is to encourage people to accumulate adequate savings, which helps them achieve a comfortable standard of living in later life.”

This is more accurate and flexible because it acknowledges the importance of the accumulation phase as part of superannuation.

“Comfortable standard of living” should replace “income” and “dignified retirement”. This provides greater flexibility and reflects more accurately what people want from superannuation.

Including phrasing that encourages people to accumulate “adequate savings” for a “comfortable standard of living” sets an aspirational goal for superannuation. It also says superannuation is not designed to support accumulation beyond what is adequate and provides for reasonable limitations on superannuation concessions and balances.

“Later life” is preferred over “retirement” because it encompasses a broader and more flexible interpretation of a person’s life course.

You can read a full version of our submission to Treasury here.

Related reading: Treasury, First Links


John Austin

John Austin

Policy and Communications Officer, National Seniors Australia

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