The Albanese government has finally legislated an objective for the super system, in an eleventh-hour achievement industry leaders and commentators said would end constant tinkering with superannuation laws.
The milestone came amid a flurry of 31 government-sponsored bills successfully ushered through the Parliament in a frantic final sitting week.
Profit-to-member sector lobby group Super Members Council said the goal of legislating the objective of super “has long held bipartisan and cross-party support”, heralding the end of a multi-year process initially recommended by David Murray’s Financial System Inquiry in 2014.
But it is understood the bill’s passage was secured when the federal opposition chose not to force a vote on the matter, which could have chewed up time and threatened the kill the legislation. Shadow Finance Minister Jane Hume previously moved an amendment to the bill accusing the government of breaking an election promise to refrain from any changes to super policy.
Treasurer Jim Chalmers kicked off his campaign to legislate the purpose almost two years ago at a Conexus Financial* Political Series event. He touted then that it would help “end the super wars once and for all” and prevent unnecessary changes to the system.
“We acknowledged that the last decade or so of super policy has been challenging for many of you to navigate,” Chalmers said in his address to super fund executives at the time. “Our predecessors took an attitude towards the industry that could be contradictory, sometimes counterproductive, and often costly.”
Chalmers called the Coalition’s COVID-19 early release scheme a “disastrous policy” and said it had come about because the previous government was “navigating the super landscape without a compass”.
“Legislating super’s objective will change that, because for the first time, we’ll have a true north, a shared goal that we can work towards together,” he said.
The objective is defined as “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”. The wording bakes in the concept of preservation as favoured by the compulsory super system’s founders and most ardent supporters. But critics have warned that it could also further restrict the circumstances in which retirement savers can access their super early, such as for medical bills or in financial hardship.
Meanwhile, the government’s plan to impose additional tax on super balance above $3 million was abandoned for the year.
The chances of legislating the second tranche of Delivering Better Financial Outcomes financial advice reform under a Labor government are also looking slimmer by the day, due to stalled negotiations over a proposal to collectively charge super fund members for financial advice they may never receive.
‘Acid test’
Major super funds celebrated the win. AustralianSuper chief executive Paul Schroder said the legislation is “long overdue” and essential for regulatory stability forward.
“Any future law reform will have to have consider the purpose and stability of the system, which is a significant step forward and highlights the fundamental nature of superannuation as a concessionally taxed, long-term savings vehicle for retirement,” he said in a media statement.
But former Hostplus group executive of member experience, Paul Watson, said some uncertainties still lie ahead with the future government.
“Like a good mission statement, its meaning is clear, to the point, and unambiguous to anyone that reads it,” Watson, now an independent consultant, wrote on LinkedIn.
“The acid test now will be to see how well our current and future lawmakers honour the spirit, principal and literal words of this purpose statement in superintending and protecting this nationally important benefit that underpins an essential pillar in the pursuit and achievement of more dignified retirements for Australians.”
Mercer senior partner David Knox said Australia is now the second developed nation to have enshrined the purpose of its retirement system in law.
The only other known nation to have done so is Switzerland, which outlines in its constitution that “the occupational pension scheme, together with the Old-age, Survivors’ and Invalidity Insurance, enables the insured person to maintain his or her previous lifestyle in an appropriate manner”.
“In both cases, we note that the purpose of occupational and personal pensions is to work with any government pension and support, thereby enabling the individual to maintain their previous lifestyle and live their retirement years with dignity,” Knox said.
*Conexus Financial is the publisher of Investment Magazine.
