Michelle Ananda-Rajah (Higgins, Australian Labor Party) Share this | Hansard source

The growth of Australia's world-class superannuation system is a major economic and civil achievement of the past 30 years. While there are shortfalls for some groups—like older women, for example—that need to be addressed, Australian wage earners will increasingly finish their working lives with super balances that will allow them to plan for a dignified retirement. Super works together with the means-tested age pension and private savings as the three pillars that provide income for retirement. However, there has not been a broadly agreed upon purpose for the super scheme, making it possible for variations on the use of the super scheme to be enacted. An example was the early access to super that occurred during 2020 in the early days of the pandemic. While this was of benefit to some participants in keeping up with mortgages and expenses, it was poorly designed and resulted in thousands of young Australians draining their super and effectively losing the benefits of compound interest.

This legislation codifies a shared purpose, a true north, for super, as follows. The objective is:

… to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.

Legislating an objective of super will provide stability and confidence to policymakers, regulators, industry and the community that changes to super policy will be aligned with the purpose of the system. It will also ensure that members and funds have more certainty over future changes to the super system throughout both the accumulation and retirement phases.

How will it work? Policymakers will be required to assess future changes to super legislation for compatibility with this objective. The terms used in the proposed objective are worth exploring. 'Preserve savings' means that super savings should not be accessed for purposes outside of retirement income, apart from truly exceptional circumstances—and draining your super for cosmetic surgery is not one of them. This recognises that super exists as a savings vehicle to provide income in retirement and is not a pool of individual savings to meet other lifetime costs prior to retirement. When savings are preserved, the compound returns on super help an individual's savings to grow over a longer period of time. That's the benefit of compounding interest. Young workers who cleared out their super balances in 2020 will miss out on these gains. The bill has no impact on existing arrangements for early access due to financial hardship or on compassionate grounds. These are unchanged.

'Deliver income' means super savings should be drawn down to provide individuals with a source of income during their retirement. The focus on delivering income in the objective makes it clear that super is not for tax minimisation. The inclusion of 'dignified' in the objective indicates that there is a certain standard of living in retirement which the super system should strive to deliver for Australians, alongside government support. 'Dignified' also reinforces the concept of delivering income and clarifies the need for trustees to ensure that they know their members' needs and support members to optimise their standard of living in the retirement phase. It's all about preserving a standard of living that Australians rightfully expect in retirement.

As Australia's super system continues to mature over time, more individuals are expected to retire with larger super balances but many Australians will continue to rely on government support to achieve that level of dignity. The inclusion of 'equitable' in the objective reflects that super policy can have a distributional impact across Australian society, and policymakers need to be aware of these impacts when making changes to this system. 'Sustainable' signifies that the super system should be robust to demographic and economic change and cost effective in achieving its objective. That speaks to intergenerational equity.

There is significant public attention paid to the accumulation phase in super in comparison to the retirement phase—for example, to public identification of underperforming funds. The super objective clarifies that super is about income in retirement. Australians will benefit from better information and guidance as they enter the retirement phase. This could be a follow-on from enshrining the objective. The objective will serve as a reminder that achieving better living standards for Australians in retirement is at the heart of the super system and that future policy changes should be compatible with this objective. I commend this bill to the House.

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