Objective of superannuation – now we are to know as legislation will tell us so!

Draft legislation to (non-constitutionally) enshrine the objective of superannuation has now (20 November 2023) been introduced into Parliament. The draft legislation is titled the Superannuation (Objective) Bill 2023. This draft legislation has, at least, the virtue of brevity: the entire bill can be read in under 10 minutes.

The effect of the Bill is simply stated. When a “superannuation related” Bill is introduced into Parliament or “superannuation related” regulations are tabled, there must also (unless an exception applies) be an assessment (called a statement of compatibility) whether the Bill or regulations are compatible with the objective of superannuation.

What is the legal or constitutional consequence if the assessment is to the effect that the Bill or regulations are incompatible? Essentially, none. A negative assessment does not have the effect of making the Bill (when enacted) unconstitutional or regulations to be disqualified. There may be embarrassment for the Minister introducing the Bill or regulations, but such embarrassment will be short lived and the incompatibility justified by reference to some higher value or necessity.

There are three critical aspects of the Bill:

The proposed objective of superannuation
The purpose to be achieved by the Bill, and
The exceptions (ie the situations when a statement of compatibility is not required)

Legislative objective of superannuation

The proposed Objective is specified in section 5(1) of the Bill; namely

“The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

The consultation draft of the Bill used the expression “sustainable manner” for “substantial way”.

Some comments on the “Objective” are:

“preserve savings” - presumably this is a reference to releasing super savings for non-retirement purposes such as housing, medical or dental expenses or mortgage arrears and such like or accessing super balances before “dignified” retirement
“deliver income” – this suggests that super balances should be accessed as (or predominately accessed as) income stream products
“dignified retirement” - presumably this means that the super balance at the commencement of dignified retirement should be sufficient to allow dignity. Well at least the objective did not use the qualifiers “improvised” or “shabby genteel”
“alongside government support” – is this an implicit upper limit on your superannuation balance – only enough to still retain an entitlement under the age pension asset-test which is a more stringent test than the age pension incomes test
“equitable and sustainable way” – presumably not too much and at not too great a cost to the government

Does this mean that the Objective of superannuation is internally inconsistent? The principal inconsistency is between the “dignified retirement” which presumably means a super nest egg of sufficient magnitude with the “equitable and sustainability” element.

Possibly a bit harsh – but one does tire of “vision” statements.

Statement of Compatibility

A statement of compatibility is an assessment of whether the superannuation changes made by the Bill (or regulations) are compatible with the Objective of superannuation. This statement can be positive, that the proposed Bill (or regulations) is consistent with the legislative objective of superannuation (with a reasoned justification for that conclusion). Alternatively, the statement could be that the proposed Bill (or regulations) are not consistent with the legislative objective of superannuation with the various inconsistences with the stated objective highlighted and explained. Presumably in the case of a negative statement the Government will present a case for the Bill (or regulations) probably rationalising its decision by reference to higher goals or greater public interest.

Exceptions

The final element is the “exceptions”. Certain kinds of bills and regulations are not required to have a statement of compatibility. The list of exceptions is illuminating. Only some of the exceptions are considered.

Any Bills or regulations relating to public sector superannuation schemes
Any Bills or regulations relating to Commonwealth parliamentary superannuation schemes
Any Bills or regulations relating to superannuation schemes for judicial office holders
And other areas which may from time to time be specified in regulations

One objective for some a different objective for others.

Parting Observations

Is the Objective of superannuation a destination or guardrail? Are future changes to superannuation intended to arrive at a “dignified” retirement with a very part age pension redolent in equity and sustainability? Or an attempt to prevent detrimental changes to the current superannuation policy changes, with the knowledge that any adverse fiscal change can always be justified by the need for equity and sustainability.

The statement of the Objective of superannuation does not prevent adverse changes to the current superannuation policy settings, the Objective merely provides the verbiage and phraseology to be used to justify any future adverse change.

Finally why bother? The Government of the day will adjust superannuation policy as it sees fit. Many adverse changes to the current private sector superannuation policy settings could be justified by the “equitable and sustainable” element of the Objective. Further, the Objective could be used to cloak adverse changes to private sector superannuation policy settings by reference to “the change is consistent with the Objective of superannuation” so nothing to look at or be concerned about.”

NOTE: This article was prepared as at November 2023. The article has not been updated in light of subsequent developments.