A lot has happened in the superannuation industry over the past six months with some of the more worrying developments, such as the proposed $3 million soft cap, overshadowing other announcements.
With the flurry of activity 2023 has already witnessed, one matter that has probably received less scrutiny than it deserves is the government’s proposed objective of super it would like enshrined in law.
Canberra has put forward 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.”
When you read it the first time it might seem reasonable and fairly innocuous, but in reality there are three terms in there that are sufficiently vague to allow our politicians to do anything they want with our retirement nest eggs.
Firstly, what is a dignified retirement and who defines what it looks like? A person used to a lavish lifestyle may think a dignified retirement means drinking Cristal Champagne every evening to wash down their repast, whereas a person who has lived a more modest existence might prefer mineral water as a nightly beverage. Who’s to say which is either appropriate or inappropriate? This is even more pertinent when you consider a consensus has not been reached as to how much money is a sufficient amount to fully fund a person’s retirement.
In a similar vein, what exactly does equitable mean? Does it mean every Australian should be working toward a particular savings target when formulating their superannuation strategy and will that target be exactly the same for each person?
Before I’m accused of reading too much into the situation, the Albanese government may have already given us a sneak peak of how the objective will work via its proposed new tax on total super balances over $3 million. Is the signal already being sent that $3 million is the figure Treasury has decided will provide for a dignified retirement and a threshold that will also ensure an equitable outcome?
The inclusion of the word sustainable also requires further scrutiny. Is this purely from an economic perspective where the government decides its fiscal policy can no longer continue to offer generous tax incentives due to the magnitude of budget deficits at any particular time, an argument that has also been used to justify the new $3 million soft cap?
Or does the inclusion of the word sustainable refer to wider societal issues? To this end, it is worth noting an address Assistant Treasurer and Financial Services Minister Stephen Jones gave to the Australian Council of Superannuation Investors earlier this week.
Here Jones’s speech was all about the government’s climate change policy, including the introduction of a Sovereign Green Bonds Program. Why? Could it be to encourage super funds to include these instruments in their portfolio asset allocations?
On this point, it is worth remembering the Member for Whitlam has in the past flagged the government’s intention of having superannuation monies do more of the heavy lifting in relation to issues it considers societal priorities, one of which is transitioning to green energy.
So there are definitely nuances worth further examination in this suggested objective of super before it is written into law. One positive aspect is this objective is still only a proposal currently undergoing consultation with industry stakeholders.
Hopefully the end result will see a narrower purpose defined that will limit rather than enable further tinkering with the retirement savings system.
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