Removing the aspirational aspect from the objective of superannuation means it will become a “race to the bottom”, according to Pitcher Partners.
The Government released its consultation paper on the definition of super this week, focusing on one that focused on savings preservation and delivering income.
The favoured objective 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”.
There were then also two alternative objectives pitched; 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”.
Brad Twentyman, partner at accountancy firm Pitcher Partners, said Treasury should have taken an approach which allowed people to do more than the bare minimum.
The ability to contribute more to super than the minimum had been almost eliminated from super over the past 20 years, he said.
“It’s like a race to bottom if you are going to define the system as something really basic and uninspiring where no one can receive a benefit more than a basic benchmark.
“If the intention is to limit the system to the 10%-12% compulsory super already legislated and little else, that system is not going to generate enough wealth to remove reliance on the Age Pension.
“By completely stripping out the aspirational element, they might restrict a few high net worth individuals but it will have a massive effect on middle income earners who might want to sacrifice more over their working life for a higher standard of living in retirement.
“If the focus of defining an objective is on who’s benefitting, it’s a flawed base from which to review. The debate will end up with a minimalist objective with no aspiration, which would essentially be taking the system backwards.”
