Superannuation funds and organisations have welcomed the Government’s consultation into the definition and objective of super.
The consultation was released on 20 February and three possible definitions were put forward for consideration.
The favoured one by Treasury was: “The objective of superannuation is to preserve savings, to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
The first alternative was: “The objective of superannuation is to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
The second was: “The objective of superannuation is to support savings to deliver income for a dignified retirement, in an equitable and sustainable way”.
Reacting to the announcement, Martin Fahy, chief executive of the Association of Superannuation Funds Australia (ASFA), said: “This objective offers a retirement aspiration which is fit for purpose, and worthy of our commitment to a future where all Australians can face into retirement with confidence.
“The Government has proposed an objective that can underpin much needed policy stability and help anchor future policy debates in ensuring our age pension remains affordable, that superannuation savings are preserved to retirement, and that the system delivers in an equitable manner for women and low-income earners.”
At the Financial Services Council (FSC), which conducted its own survey into a preferred super objective, chief executive Blake Briggs, said: “The Government’s proposed wording heads in the right direction. We know from consumer research conducted for the FSC that Australians want a simple definition that speaks to their aspirations and has a singular focus on their retirement.”
Briggs also felt a clear objective would help future policy changes in super such as including super on Paid Parental Leave and closing the gender gap.
“The next step will be examining the detail of the proposal to ensure it sets the right parameters to prevent policy tinkering that could undermine confidence in the super system for the 16 million Australians who are doing the right thing by saving for their own retirement.
“An objective of super will help drive the focus of policy reform to address systemic issues, such as including super contributions on Government paid parental leave to help close the gender gap where women retire with 18% less super than men.”
Debby Blakey, chief executive of super fund HESTA, said: “HESTA welcomes the Commonwealth Government proposing an objective of super that enshrines the importance of the principles of equity, preservation, sustainability and dignity in retirement.
“This represents an important fork in the road for our super system, which is world leading, but has a persisting gender-blind spot. The consultation period is an opportunity to come together and shape a stronger super system now, and for generations to come.”
Bernard Reilly, chief executive of Australian Retirement Trust (ART), said: “Ultimately all of the features of our super system, whether that’s balance caps or tax settings, should be about making our super system both sustainable and equitable. An objective of super that is enshrined in legislation will make all these other discussions and debates easier for the industry”.
Critical feedback
However, David Knox, partner at Mercer, said “a bigger picture” was needed and that should include the Age Pension.
“A bigger picture is needed to define the objective of superannuation. Rather than solely focusing on superannuation reform, Government must acknowledge that superannuation is but one source of income in retirement.
“The retirement income system is more than the sum of its parts. To define the objective of superannuation, we must first look at the system as a whole and understand the Age Pension so it can work with superannuation to achieve better outcomes.
The Council of Life Insurers (CALI) said it supported the consultation but felt the proposed definition lacked inclusion of life insurance.
“Having insurance in superannuation means that Australians have a safety net when faced with major illness or disability,” said chief executive Christine Cupitt.
“Insurance in superannuation can step in to meet their financial need first, which helps to protect superannuation balances and enable a dignified and financially secure retirement.”
