In its pre-budget submission, Industry Super Australia (ISA) said it was pleased to see the government’s commitment to legislate an objective of super but stressed the importance of any objective upholding the principles of preservation.
ISA noted in the submission that a legislated objective for super would help stabilise the system’s foundations for members as well as the economy.
“Central to any legislated objective is the concept of preservation because it is critical to ensuring the retirement income system can deliver more people a better standard of living in retirement,” the submission stated.
“When superannuation benefits are used for purposes other than retirement, the impact on members and the Budget [sic] is significant.”
ISA noted its recent analysis of the long-term impact of the COVID-19 early superannuation release scheme on retirement incomes and age pension entitlements.
The analysis indicated that a 30 year old who accessed super early could end up with $90,000 less in super at retirement.
It also estimates that $1 taken out early from super can trigger an increase in age pension entitlements of up to $2.50 which taxpayers need to cover.
“We look forward to working with Government [sic] on this and other issues to strengthen Australia’s super system for the financial benefit of super members, including maintaining the legislated increases to the Super Guarantee and ruling out changes to the principles of preservation and compulsion,” the submission said.
CPA Australia in its submission similarly stated that reaffirming the objective for super — to provide benefits to members in retirement — would help minimise leakage from superannuation unrelated to retirement and to provide certainty regarding the use of retirement savings held in superannuation.
“This will help ensure that Australians enjoy the standard of retirement for which they had planned,” it said.
The submission explained that Australia’s superannuation system matures and balances grow, greater consideration will need to be given to what is an adequate level of retirement savings for average Australians.
“The level, sustainability, and equity of concessions provided to encourage retirement savings and the taxation of superannuation need to be considered,” said the accounting body.
“This can only occur once an objective for superannuation — and retirement savings — is clarified. It is important that Australia’s retirement income system be properly equipped to deal with its primary purpose — retirement.”
The submission said that a clearly articulated objective for superannuation and the retirement savings system more broadly will aid in more careful consideration of future policy settings.
“This includes the taxation of superannuation, the concessions provided to encourage superannuation savings and early access to superannuation,” it said.
