Superannuation’s new objective to stop raids on retirement savings

Treasurer Jim Chalmers says new legislation will help stop raids on superannuation savings.

The federal government wants to shut the door on Australians dipping into their superannuation to pay for housing or other non-emergency uses, and avoid a repeat of the $38bn stripped from super during 2020s Covid-19 early release scheme.

Draft legislation released on Friday to introduce an objective of superannuation says super should not be accessed for purposes outside of retirement income apart from in exceptional circumstances.

However, super could still be released as a last resort for terminal medical conditions, incapacity, compassionate grounds and severe financial hardship, “but not to meet other lifetime costs prior to retirement”, it says.

“When savings are preserved, the compound returns on superannuation help individuals’ savings to grow over a long period of time and enhance financial security in retirement.”

More than 2.6 million Australians withdrew up to $20,000 each from their super funds through the Covid early release scheme in 2020, with many people wiping out their entire balance.

Treasurer Jim Chalmers says the super legislation delivers peace of mind to savers. Picture: NCA NewsWire/Martin Ollman

And in its unsuccessful election campaign last year, the Coalition promised to allow first home buyers to access up to $50,000 – or 40 per cent – of their super to get into the housing market, but its policy was widely opposed by Labor and the super sector.

Treasurer Jim Chalmers said legislating an objective for super would give “confidence to the super industry and peace of mind to Australian workers that we’ll do everything we can to safeguard their savings”.

“The last decade saw the former government raid the superannuation system for their own purposes – with devastating impacts on the savings of tens of thousands of Australians,” he said.

“An agreed objective of super will serve as a guide for future governments, regulators, industry, and the wider community, instilling greater confidence in the system for generations to come.”

The objective – a Labor election promise – has been supported by the super industry, and the draft legislation proposes the definition for super “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

The draft legislation also says superannuation should be drawn down to provide people with an income source during retirement, making it clear that super is to be used rather than hoarded for future generations.

And it provides certainty that the age pension will remain as a social safety net for those with low or no super balances.

“Many Australians will continue to rely on government support to substitute or complement their superannuation and private savings to achieve a dignified retirement,” says the draft legislation, which is open for consultation until September 29.

HESTA’s Debby Blakey says Australia has one of the world’s best super systems.

Australia’s superannuation pool has grown from $148bn in 1992 to more than $3.5 trillion in 2023, and will continue to grow despite a greater number of people drawing down on their savings in the future, it says.

Industry super fund HESTA, which manages more than $74bn of Australia’s retirement savings, welcomed the legislation and its wording.

HESTA CEO Debby Blakey said on Friday that Australia had one of the world’s best super systems, and legislating an objective would provide a shared understanding for members, super funds, regulators and governments.

“The wording of the objective released by the Albanese government includes the system’s central pillars – preservation and delivery of income – while highlighting the fundamental importance of dignity and equity in retirement,” Ms Blakey said.

“We look forward to participating in the government’s further consultation to ensure that women and those on lower wages can more equitably share in the benefits of super and that our system continues to deliver even better retirement outcomes in the years ahead,” she said.