Superannuation objective bill ‘ineffective’ says IFPA

The Superannuation (Objective) Bill 2023 introduced into Parliament last week has received a mixed response from industry, with several associations and industry bodies viewing it as redundant.

The bill proposes to legislate the objective of superannuation which is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

The objective remains unchanged following the consultation process. The legislation, if passed, will require policymakers to assess future changes to superannuation legislation for compatibility with this objective.

The Institute of Finance Professionals Australia (IFPA) said it did not support legislating the objective of superannuation, with the legislation ineffective due to its lack of enforceability.

“Although the introduction of the statement of compatibility in the legislation appears to be a positive change, we have concerns about its operation and enforceability,” it said, commenting on the introduction of the bill.

“If the objective is legislated, there will be an obligation to prepare and lodge a statement of compatibility but it will not be binding on current or future policy makers, governments, courts or tribunals. It will provide no rights and will have no consequences for failure to comply with that obligation. In other words, the legislation will be ineffective due to its lack of enforceability.”

As a result, the IFPA said legislating the objective will fail to achieve any real purpose and could be completely ignored.

“We believe the answer to what the objective of superannuation is for already exists by way of the sole purpose test as it already contains an excellent legislated purpose,” the association said.

“We also have issues with the terms ‘equitable and sustainable’ as they will allow the government to continue making changes to the superannuation system, as can be seen with the newly proposed Division 296 tax.”

CA ANZ said most of the changes made to the superannuation system over the past two decades could be justified under the wording of the objective.

“Some of these changes made over the last twenty years have not been consistent with other changes that have been made during that period of time,” it said in its submission.

“In our view the superannuation legislation already contains an excellent legislated purpose and we did not think legislating an objective for the superannuation system in isolation will assist anyone including the government.”

The accounting body has also previously suggested that the government should create an objective for the whole retirement system, rather than just superannuation.

The Association of Superannuation Funds of Australia (ASFA) has welcomed the introduction of the bill, with the association strongly supporting the government’s move to enshrine the objective of superannuation into legislation.

“The objective puts preservation, retirement income, equity, sustainability and a dignified retirement at the heart of superannuation policy while recognising the ongoing role of the age pension,” said ASFA Interim CEO, Leeanne Turner.

“It offers a retirement aspiration which is fit for purpose, paving the way for a future where all Australians can approach retirement with confidence.

“As drafted in this bill, the objective will underpin policy stability and help anchor future policy debates in ensuring our Age Pension remains affordable, that superannuation savings are preserved to retirement, and that the system delivers in an equitable manner for women and low-income earners.

ASFA said the legislation acknowledges the role group insurance through super can play in delivering valuable protection to the community and supporting a dignified retirement, as well as the overall contribution insurance makes to the sustainability of the system.

“ASFA supports the formalisation of an objective for superannuation that holds stakeholders across the system accountable for the long-term retirement outcomes of Australians and which encourages stability in the policy settings and the security of members’ benefits.

SuperAPI also agrees the legislation will serve as a significant step forward towards better protecting the hard-earned superannuation savings of Australian workers.

“The Superannuation (Objective) Bill’s proposed amendments greatly align with our mission to achieve a better financial future for all Australians by engaging them in their most significant asset outside of home ownership, their superannuation,” said SuperAPI.

“The focus on enhancing retirees’ sense of security in future dignity, aligns with our aim to empower Australians to make informed decisions regarding their choice of superannuation fund; informed choices are more likely to achieve better outcomes for all Australians.”