Background and overview
Labor built Australia’s superannuation system. We will always work to
ensure that it is fair, sustainable and sets Australians up for a comfortable
life in retirement.
Labor Senators support the recommendation of the Murray Financial System
Inquiry that the objective of superannuation be legislated.
Labor Senators believe that something as significant as the objective of
superannuation needs proper consideration and bipartisan support.
If an objective is worth having and is worth legislating then it is
worth doing properly.
Labor Senators are concerned that the Government has failed to secure
sufficient stakeholder support for the proposed objective or to achieve the
broad political consensus recommended by the Murray Financial System Inquiry.
The majority of written submissions disagree with the objective set out
by the Government. Yet the hearing also revealed that some stakeholders are
close to agreeing on key concepts to be included in a superannuation objective.
Labor Senators are disappointed that the Government abandoned
discussions with the Opposition on the proposed objective. Labor had been
engaging constructively and in good faith with the Government until it abruptly
ended these conversations and rushed out with its proposed objective.
Contributions from the written submission and hearing processes
The first criticisms of the Government’s superannuation objective
approach were delivered in August 2016 when in rare circumstances of agreement,
the Association of Superannuation Funds of Australia (ASFA), the Australian
Institute of Superannuation Trustees (AIST), Industry Super Australia (ISA) and
the Self-Managed Super Fund Association (SMSF Association) wrote to the
Minister, asking to meet and to consider a common objective they had developed.
Industry Super Australia (ISA) also made specific reference to the lack
of consultation that occurred through the Murray Financial System inquiry:
There was no consultation on the objective of superannuation.
The inquiry did not seek views on the recommended objective which found its way
into the final report. As a consequence, the committee members, as esteemed as
they are, did not obtain the views and perspectives of other key stakeholders
in the system. If they had, they may well have landed at an objective which
could obtain consensus support, which is what the inquiry recommended—that is,
that an objective achieve consensus support. It has not done that.
The Australian Institute of Superannuation Trustees (AIST) also made
strong comments about the lack of consultation and how close different parties
in the industry are to reaching a common objective definition:
First of all, like Industry Super Australia, we believe that
the process that has got us to this point is flawed and that the government
should go back to the drawing board in terms of the definition. Secondly, we
have an alternative view in relation to what we think should be the proposed
definition and the associated processes. We have some comments to make in
relation to the statement of capabilities, and we think that there are some
deficiencies associated with that. Finally, we believe that the role of
superannuation in contributing to national savings should be recognised as a
Senator KETTER: When I compare the consensus definition that
emerged in your letter of 2 August to the FSC's proposed objective, I see both
referring to all Australians; I see in both the use of the comfortable
standard; I see that in both the word 'adequate' appears, although in different
places in the objective. How far apart are you from the FSC? What do you see as
the significant difference between your two objectives?
Mr Haynes: In summary, I do not see any significant
difference between our position and that of the FSC. The FSC was involved in
many of the discussions that resulted in the other association sending the
letter of August last year and there appeared to be a high degree of consensus.
I hope I am not talking too much out of school in relation to that, but, given
where the FSC landed, I do not think I am.
Senator KETTER: We seem painfully close to reaching a
consensus with all of the major players in the superannuation industry, if I
could call it that.
Mr Haynes: Yes, and hence my earlier comment about this being
a wasted opportunity if that consensus was not used as the stepping stone for
the next level of consensus—that is, in discussions with government and other
Industry Super Australia (ISA) also made a concise statement about its
concerns with the bill which were repeated in many other submissions:
There are five key reasons why the bill is deficient.
Firstly, the proposed primary objective does not faithfully reflect the basis on
which the system was established. That is, to enable Australians to enjoy a
decent standard of living in retirement.
Secondly, the proposed objective does not have consensus
support as recommended by the Murray review.
Thirdly, the objective as drafted is inconsistent with the
sole purpose test and conditions of release in the Superannuation Industry
(Supervision) Act—the SIS Act.
Fourthly, the legislative architecture is flawed, because the
secondary objectives are subject to regulation rather than being included
alongside the primary objective in the law. As a consequence, the government of
the day may set and alter secondary objectives to suit their purposes and other
policy and political objectives.
Finally, the objective as drafted will provide no guidance to
policy development or competing policies.
The Grattan Institute in their submission and evidence stated that
Australians on average are saving significantly outside of superannuation and
therefore superannuation is not the main pillar of retirement income. This
underpinned their claims that the superannuation guarantee level should not be
lifted, that 'Most Australians can already expect an adequate income in
retirement' and objectives be set for the retirement income system as a whole,
not just superannuation.
ISA presented a critique of this analysis, finding that it inflates the
apparent assets of low and middle income earners who actually have very little
in the way of financial assets other than superannuation and are especially reliant
on the superannuation guarantee to deliver income over and above the age
pension. This would mean that the superannuation objective is a very important
component in setting desired retirement outcomes.
Labor Senators recommend that the Government withdraw this Bill and
undertake further consultation.
Labor Senators recommend that the Government go back and consult further
with stakeholders with a view to developing an objective which has stronger
Labor Senators also recommend that the Government meet the
recommendation of the Murray Financial System inquiry to seek broad political
agreement for the objective of superannuation.
Labor Senators are willing to engage cooperatively and constructively
with the Government on an objective for superannuation.
The Government withdraw the Superannuation (Objective) Bill 2016
The Government recommence discussions with the Opposition and with
stakeholders to reach broad political and industry support for a superannuation
Chris Ketter Senator Jenny McAllister
Chair Senator for New South Wales
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