It is imperative that Government puts the process of legislating the objective of superannuation back on the agenda in 2019.
The push to resuscitate this recommendation that emanated from the Financial System Inquiry (FSI) came today at the SMSF Association’s 2019 National Conference where an expert panel all concurred that superannuation urgently needed an objective to ensure a more holistic policymaking approach to the retirement incomes system.
SMSF Association Head of Policy Jordan George, Mercer Senior Partner David Knox and BT Financial Group Chief Executive Officer Brad Cooper, while addressing the topic “Challenges and opportunities facing SMSFs today”, all agreed that the lack of a legislated objective of superannuation is an obstacle to sensible superannuation policy, especially in the current environment.
The panel noted that with policymakers navigating how to implement the Royal Commission and Productivity Commission recommendations, an objective for superannuation would guide them to sensible implementation outcomes.
By legislating the objective of superannuation, it would help drive effective policy and the role of all superannuation funds, industry, retail and SMSFs, especially in anticipation of these legislative recommendations.
The speakers said that legislating the objective of superannuation should also play a role in clarifying and distinguishing the roles of superannuation and the age pension. This would help remove the possibility that the objective of superannuation could be interpreted so that any income provided by superannuation above age pension level is a sign of an overly generous tax concession support for superannuation.
During their discussion, the panel commented on the absence of a concept of adequacy as an objective as one of the key reasons it was not successfully implemented after the FSI recommended it. It is essential that any objective not only has a focus on providing retirement income but also ensures that retirees are able to build adequate retirement savings through the superannuation system to manage the financial risks of aging and retirement.
The panel noted that an objective for superannuation was a policy that enjoyed broad support across the superannuation sector from a wide range of participants in the sector.
The objective of superannuation should have an important role in clarifying policy and the role of superannuation trustees.
For the primary objective and any guiding principles to effectively guide retirement income policy, there needs to be a direct link between new policy and the enshrined objective and principles. Any new legislation that affects retirement income policy (e.g. superannuation, taxation, age pension, etc.) should be reviewed against the objective and principles.
They concluded that with the policy landscape for superannuation so uncertain given the recommendations from the Royal Commission and Productivity Commission, an objective was needed to define the direction and move away from ad-hoc changes.
Previous and numerous ad-hoc changes and lack of integration between all parts of the sector have degraded this confidence. A move to restart the conversation and make effective changes to improve the system only when necessary is essential to this process.
The need to legislate an objective for superannuation was a key recommendation to Government in the SMSF Association’s 2019-20 Budget submission.