Despite managing $3.5 trillion in assets, Australia’s superannuation system, and our retirement income system more broadly, have never had legislated aims.

Download the submission

Without moorings, the super system has provided excessively generous tax breaks that cost the budget $45 billion each year and will soon exceed the cost of the Age Pension. The policy settings force most Australians to save more than they need (or are likely to spend) in retirement, turning superannuation into a taxpayer-funded inheritance scheme that exacerbates wealth inequality. Superannuation is being used at great budgetary cost – via failed policies such as co-contribution and carry-forward schemes – in an effort to boost the retirement incomes of vulnerable Australians, when better tools are available.

Setting clear policy objectives can help by anchoring policy changes and boosting public understanding. They can also provide a framework for assessing the system’s performance.

Unfortunately, the government’s proposed objective for the superannuation system ‘to preserve savings to deliver income for a dignified retirement, alongside government support’, is unlikely to prove an effective guide to fixing many of these problems. A bad objective for superannuation is worse than no objective at all.

We therefore cannot support the Bill as proposed.

The proposed objective elevates the role of superannuation as the primary source of retirement income, despite the fact that superannuation accounts for less than half the income that retirees draw on today, and will account for little more than half the income of retirees in future. Rather than providing a solid foundation for good policy-making, the proposed objective is a recipe for parochial, super-centric policy-making.

Beyond referencing the importance of preservation, the proposed objective says nothing about how the superannuation system should trade-off current and future consumption, despite the fact the core purpose of the compulsory Superannuation Guarantee is to force Australians to forego spending today in return for more in retirement.

Further, the concept of a ‘dignified’ retirement is entirely subjective. To the extent ‘dignity’ has a commonly-understood meaning in relation to retirement income, it pertains to a minimum standard of living, which superannuation cannot guarantee.

There are real challenges to ensuring our retirement income system delivers for Australians, including low-income earners, women, and especially renters. But the Age Pension and Rent Assistance, rather than superannuation, remain the best tools to help people at risk of poverty in retirement. Overstating the role of super risks ineffective and costly policies that divert resources and attention away from policies that can better prevent poverty in retirement.

The government should go back to the drawing board and establish an objective for the retirement income system as a whole, as recommended by the Retirement Income Review in 2020. The Retirement Income Review argued that the retirement income system should aim ‘to deliver adequate standards of living in retirement in an equitable, sustainable, and cohesive way’. This remains the best starting point for future work on a more effective objective.

Download the submission

Joey Moloney

Housing and Economic Security Deputy Program Director
Joey Moloney is the Deputy Program Director of Grattan Institute’s Housing and Economic Security program. He has worked at the Productivity Commission and the Commonwealth Treasury, with a focus on the superannuation system and retirement income policy.