Financial services minister Stephen Jones has refuted suggestions the government’s proposal to legislate an objective for superannuation amounts to an attempt to dictate to funds how to invest members’ money.
Jones told the SMSF Association National Conference in Melbourne last week a key reason for legislating an objective for superannuation is to prevent superannuation being co-opted by governments to cover policy failures.
“I have seen commentary that somehow the government has some agenda to tell super funds how to spend their money,” Jones said.
He added he found this perception puzzling, given former Treasurer Josh Frydenberg was almost given veto power to direct what super funds could invest in.
The move was ultimately scrapped after opposition from Labor and the independents.
“It was [the Coalition’s] policy, not ours,” Jones said. “I thought it was a dumb idea then and it’s a dumb idea now.”
Although Jones said the intention to drive a clear definition for the purpose of the super was not about directing super funds on how to allocate money, he added “it would be nuts not to explore” using super fund money for nation building.
“This is not about bending the interests of members or trustees to the government’s interest; it’s about finding areas where we can work in co-operation and in partnership, where you can make great returns for your members, at the same time as investing in something that’s going to advance the national interest,” Jones said.
Jones added that “ironically, the confected outrage that has come from some quarters is fed by the lack of an objective” for the current $3.4 trillion pool of retirement savings.
“It is easy to forget that the success of superannuation has been hard fought and at times uncertain,” Jones said.
“And the attacks keep coming: superannuation for housing; superannuation for education; superannuation for healthcare. Like modern-day Edmund Hillarys, they look at the Mount Everest of superannuation and want to raid the retirement incomes of working Australians simply because it is there. In contrast, we are actually starting from a very simple premise: superannuation is for retirement incomes.”
Jones said there are “opportunities for super funds to be a force multiplier in the economy through productivity-enhancing investments”.
“And we want to work with the sector in areas where members’ interests align with national interests,” he said.
“With an enshrined objective of super, members and trustees will know that the use of their funds must meet a simple test: is it about retirement income?”
Concerns on account balance caps
The government’s proposed objective of super has raised concerns particularly in the SMSF sector that the government may be laying the groundwork to place new caps on account balances – in addition to caps that already exist – in light of the fact that a very small number of funds have very high account balances, and by 2050 the cost of tax concessions to super funds is likely to exceed the total cost of the age pension.
“It is important to put taxation in the broader context of how the Government supports Australians in retirement – through tax concessions and the cost of the aged pension,” he said.
“With the Budget under increased pressure to meet the costs of essential services like health age, aged care and the NDIS, we need to consider reforms that put all elements on a more sustainable basis.”
While Jones again raised the issue of SMSFs that have balances of $100 million, he insisted that he is “not singling out the self-managed sector for attack”.
“But it is timely to have a conversation about what a dignified retirement means in the context of a sustainable retirement system,” he said.