Clarification that the $3.3 trillion superannuation system is focused on the benefits of fund members and their retirement income is to be welcomed as it would provide ‘certainty for individuals’ and improve ‘the direction to trustees in respect of their duties in governing superannuation funds’.
The submission also calls on the government to be clear about its intentions around the possibility of nation-building in the wording of the legislative objective.
“Legislating the objective of super could potentially have the effect of helping to ameliorate political interventions in the system, which assists with entrenching greater certainty, stability and long-term stewardship of one of Australia’s most important assets,” the submission says.
“The wording of the proposed objective clarifies that superannuation is for retirement income (notwithstanding there may remain extraordinary circumstances for early release).
“A retirement-income objective will reduce the potential for fund members to use the system architecture as a wealth accumulation framework or facilitate estate planning strategies.
“A focus on retirement income may offer additional benefits such as providing support to individuals who feel pressured by third parties to withdraw a lump sum at preservation age, whether that is to pay debts, gift to family, or bequest the money elsewhere (i.e., use the money for purposes other than supporting their own retirement income.)”
When considering the risks associated with legislating the objective of superannuation, FINSIA’s volunteer working group said it noted the statement in the Executive Summary of the Consultation Paper ‘There is a significant opportunity for Australia to leverage greater superannuation investment in areas where there is alignment between the best financial interests of members and national economic priorities, particularly given the long-term investment horizon of superannuation funds’.
“The wording of the proposed objective does not seek to include or enshrine that superannuation investments could or should be aligned with national economic priorities,” the submission says.
“If the government does in fact intend to seek opportunities to promote or divert superannuation investment toward areas of ‘national economic priorities’, merits aside, this should be made clear in the objective.
“The setting of an objective should not be interpreted as a licence to promote or divert superannuation investments to areas considered national economic priorities, without this being made clear.
“If made clear within the legislated objective that the Government will seek to leverage superannuation investments in areas where there is alignment between the best financial interests of members and national economic priorities, the merits of this should be explored and debated.
“Furthermore, safeguards and risk limits should be in place.
“As a dystopian example, there should not be a legal possibility that superannuation funds are required to invest 100% of their funds in defence, with a Government claiming this to be in the members’ best interests.”
Looking at the ongoing issue of housing affordability, the submission says that suggesting super could improve the crisis could lead to ‘complacency from policymakers’.
“The debate around the objective for superannuation is likely to include a discussion around the merits of allowing early-access for housing,” it says.
“The current Australian housing issues around affordability and availability is a distinct and urgent policy issue that requires dedicated, practical and innovative policy responses.
“Suggesting the superannuation system may improve the crisis may result in complacency from policymakers who feel the issue is being dealt with.
“Government policy should address the national housing issue rather than looking for a solution that involves retirement savings.
“We also are concerned about the potential inflationary pressure on housing (as a result of an early-release policy for first home buyers) diminishing the value of any early-access. We recognise the need for further discussion on this issue given the various complexities.” Read submission here.
And access all our submissions here.
