Superannuation, while being one of the integral components of Australia’s retirement system, along with the aged pension and savings, has never had a clear legislated objective to guide policy makers. As a consequence, it has been used for many other objectives, such as housing and healthcare, which may conflict with the ultimate goal of providing Australians with income in retirement.

The government has released a consultation paper seeking views to legislate an objective for superannuation. The paper builds on the outcomes of the 2014 Financial System Inquiry and the 2020 Retirement Income Review, which both recommended an objective for super to ensure the consistency and stability of retirement income policy.

“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.” – The Hon Stephen Jones MP Assistant Treasurer and Minister for Financial Services

The paper outlines the proposed objective of super which is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way. Breaking down the individual parts of the objective gives a clearer picture of what the government is attempting to do:

• “preserve savings” refers to the concept that contributions to super should not be accessed unless for the purpose of income in retirement barring exceptional circumstances.
• “deliver income” makes it clear that the purpose of super is to provide savings that are drawn down in retirement to support the standards of living and not for minimising tax on wealth accumulation or for retirees to leave tax-effective bequests.
• “dignified” is a qualitative measure which will differ between individuals and recognises that individuals deserve a high standard of living in retirement with access to both super and government support, if required.
• “equitable” means delivery of similar outcomes to people in similar situations and targets support to those most in need.
• “ sustainable” refers to the super system being cost-effective for taxpayers in achieving retirement outcomes and beyond a certain level of income, additional government support through tax concessions is not necessary or appropriate.

In a recent speech, the Assistant Treasurer and Minister for Financial Services, Stephen Jones singled out what it calls “bad policy” such as the pandemic early release of super, the results of which will be “felt for decades to come” and raiding superannuation to buy a home “in a supply constrained, inflationary environment”. While the objective of super is for retirement, the Assistant Treasurer noted that in exceptional circumstances of genuine hardship, there will be flexibility to access funds before retirement.

According to the government, once an objective for super is legislated, broad benefits as well as performance and accountability issues can be unlocked. For example, trustees will be held accountable for the use of member funds to deliver income, and every investment should meet a performance benchmark to ensure they are meeting retirement income needs.

In addition the government indicates that there will also be opportunities to leverage greater super investment in areas where there is alignment between the best financial interests of members and national economic priorities, given the long-term investment horizon of super funds.