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Government opens consultation on codifying objective of super
The federal government has released an exposure draft of its proposed objective of superannuation, continuing its efforts to “codify a shared purpose” for Australia’s $3.5 trillion super system in legislation.
The draft of the Superannuation (Objective) Bill 2023 states that “the objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
The objective, released for consultation on September 1 along with explanatory materials, matches language Treasury proposed when it asked for stakeholder feedback on the plan in February.
“The objective does not alter superannuation trustees’ existing obligations or how members’ money can be invested or accessed, but it does serve as a reminder to them of their role in the super system, including to support members holistically during their working life and their transition to retirement,” Treasury said in announcing the consultation.
“The draft legislation ensures that future changes to the superannuation system are compatible with its objective by requiring policymakers to assess proposed changes to super legislation for compatibility with the objective,” it said.
According to the explanatory material (EM), enshrining the objective in legislation will mean policymakers must ensure future legislative changes affecting superannuation are compatible with it. Any bills or regulations relating to super will need to include in their explanatory materials a statement of compatibility with the objective.
“The three pillars of the retirement income system – superannuation, the Age Pension and private savings – work together to support Australians in retirement,” the EM stated, adding that the superannuation system’s role is central. It noted that more than 15 million Australians participate in the system and that total super balances as a proportion of GDP are expected to almost double over the next 40 years.
“Despite the importance of the superannuation system, both for the economy and for individuals’ retirement standards, there has not been a broadly agreed purpose or objective for the system,” according to the EM.
“Legislating an objective of superannuation will provide stability and confidence to policymakers, regulators, industry and the community, that changes to superannuation policy will be aligned with the purpose of the superannuation system. It will also ensure members and funds have more certainty over any future changes to the superannuation system throughout both the accumulation and retirement phases.”
The proposed wording of the objective builds on recommendations from the 2014 Financial System Inquiry and the 2020 Retirement Income Review, integrating concepts such as providing a minimum standard of living in retirement and the interaction with government support, equity and sustainability, the EM explained.
“The key concepts within the objective are not intended to be considered in isolation; rather, policymakers will need to consider and make informed decisions on the trade-offs that may be required between the different concepts to ensure that superannuation policy delivers on the broader objective in a cohesive way.”
The government is seeking feedback on the proposals until September 29.
