GOING BACKWARDS TO GO FORWARD
When it comes to potential changes to Australia’s superannuation system as foreshadowed to be announced in next month’s Federal budget, we need to ensure the original objective of superannuation is not lost, says the Institute of Public Accountants (IPA).
The Financial System Inquiry (FSI) has recommended important changes to improve some of the anomalies in our retirement savings system which encompasses superannuation. “One of the recommendations is to develop and introduce legislation to enshrine the objective of the superannuation system,” said IPA chief executive officer, Andrew Conway.
“It may be ironic that we have to go backwards to go forward but the IPA believes this is an important step in the evolution of our superannuation system. We need to address anomalies and stop the constant tinkering which generates distrust in the system.
“Australia’s superannuation system has been ranked as third best in the world by the Mercer Global Pension Index which measures against features of adequacy, sustainability and integrity, so there is a lot to like about our present system.
“Whilst our compulsory superannuation system is still relatively young, it is already playing a significant role in our nation’s prosperity.
“We agree that an updated legislated objective will serve as a guide to future reforms assisting policy-makers, regulators, industry and the community about the fundamental purpose of superannuation.
“At the heart of the objective is the goal to achieve better and sustainable retirement outcomes, however this should not be open-ended.
“There are a number of ways to help government prevent superannuation from becoming an estate-planning tool such as limiting tax concessions above a certain level or imposing higher levels of taxation on the transfer of death benefits to non-dependants as bequests.
“These options will help with the system becoming more fiscally sustainable by limiting the tax-incentivised reasons for using superannuation as an estate planning vehicle. The objective of our retirement system is to improve retirement incomes but there needs to be a limit to the amount of taxpayer support to ensure fiscal sustainability.
“Our superannuation system is already doing well in regards to its principle purpose and enshrining its purpose will provide an enduring reference point to guide future decision making by all policymakers, which will go a long way in instilling community confidence in superannuation,” said Mr Conway.