Objective of superannuation thrust in the spotlight again

The Financial Services Council (FSC) has warned that super “is at risk of being politicised”, with its CEO urging lawmakers to re-prioritise the stalled bill to enshrine the objective of superannuation in law ahead of the next election. 

With the next federal election set to take place in less than a year, Blake Briggs said in a post on LinkedIn that in order to ensure stable tax and policy settings steps need to be taken ahead of the election. 

Briggs is particularly worried because of the current rhetoric with the government raising taxes on super balances, while the opposition pushes for access to super for housing. 

“There is less than 12 months to the next federal election, and this always poses a risk to the financial services sector, with the industry at risk of being pulled in different directions by competing political parties,” he said.

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According to Briggs, what’s now necessary is a clear, legislated objective that would protect consumers from “tinkering” that ultimately undermines confidence in the system. 

“At almost $4 trillion, our superannuation system may seem like you can solve all of Australia’s challenges. But if we undermine the principles of preservation and investing in line with the best financial interests of consumers, then we also undermine the superannuation system’s capacity to deliver on its primary objective – adequate retirement incomes,” Briggs said.

The council previously voiced support for the Superannuation (Objective) Bill 2023, which was tabled in Parliament in November 2023, and was introduced and read in the Senate in March 2024.

The second reading was moved on 20 March 2024, with an update yet to be provided. 

“The FSC is encouraging the government to prioritise a stalled legislation that would enshrine the objective of the superannuation system in law before the next election,” said Briggs.

Meanwhile, Mary Delahunty, CEO of the Association of Superannuation Funds of Australia (ASFA), has said allowing access to super for home ownership is “not an effective policy” and could harm retirement outcomes in the long term.

Although she did not touch on the objective of super, she said that while tempting, early access to super doesn’t work. 

“Young Australians are in a unique set of generational circumstances. Millennials are arguably the first generation in our history to be worse off economically than their parents. It’s difficult to reassure young people that the Australian Dream is alive and that it’s worth saving for a brighter future. In that context, ‘obvious’ ideas like early access to super can seem tempting — until you realise they wouldn’t work,” said Delahunty in an interview with PritchittBland. 

Previous ASFA research has shown early release to super for housing is more likely to worsen intergenerational inequality, rather than assist first home buyers.

“We know 50 per cent of renters have less than $30,000 in their superannuation, much less than the approximately $120,000 deposit needed for a house purchase,” she said.

“More effective policies are needed to improve housing supply and the overall economic outlook for younger Australians. Early release of super seems like an easy option, but it isn’t an effective policy,” she said, adding the move is unlikely to lift home ownership rates.