Objective of super a web of complexity
The enshrinement of the objective of superannuation is riddled with complexity and questions must be asked as to whether it could be simplified to reduce the burden on the industry, according to an academic.
University of Melbourne research director and professor of finance, Professor Kevin Davis, said there had been excessive debate over the specificities of the objective but it should kept simple.
Speaking during a panel discussion at the 2017 SMSF Association Conference in Melbourne last week, Davis said policymakers should view superannuation as part of the overall retirement policy and should form the objective in this context. "For example is the pension a right or is it a safety net? The trouble is a lot of this is about dealing with the complexities of the system. And the question you have to ask is does it have to be complex?" Davis asked.
"Do we have a system where we've built in so many tax concessions and various types of retirement [products] that we're wasting a lot of services on people dealing with those complexities. Can we make it simpler?" SMSF Association head of policy, Jordan George, said there was no reference to either adequacy or what the association called security provided in retirement to ensure self-sufficiency and a comfortable standard of living in retirement.
"The current wording is quite open to interpretation to a future minister that any support above the age pension income level is too much in terms of the tax concession level," George said.
"Our view has been that the idea of having a sub objective of the system providing a dignified and secure retirement would allow future policymakers to be directed that tax concessions are appropriate for encouraging people to save for a level above the Age Pension." George also said there was no definitive idea of what 'adequate' meant, there was a lack of consensus on whether policymakers would use replacement rates or targeted levels of income. While the government has decided that super should provide people with adequate levels of retirement income, this may not be the case in other funding areas such as Age Pension, Newstart and disability funding. Davis said the objective should focus on a social policy that included the notion of people having a dignified, adequate retirement along with adequate health care and aged care requirements such as accommodation.
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