Retirement
Superannuation is for spending
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It is remarkable that, more than 25 years after the key planks of today's superannuation system were put in place, we still have not defined the purpose of superannuation, despite recent (to date) unsuccessful attempts to legislate an objective.

Indeed, a better aim for our politicians might be to establish an objective for the overall retirement income system, encompassing age pension and related benefits, and compulsory and voluntary superannuation.

Looking at the whole system, rather than just superannuation (or any other component) would help to promote better integration of the various components over time.

Achieving an overall objective would allow more specific goals for the individual components, including superannuation, to be developed. We hope to see this matter addressed by the upcoming Retirement Incomes Review, announced by the Federal Treasurer in September.

In the meantime, it should not be contentious to assert that superannuation savings accumulated during working years should be spent down (ideally, as a regular income) in the years after employment ends. But too often even this limited purpose is not reflected in public discussion of superannuation and the retirement system.

Often there is an assumption (generally unspoken) that assets individuals have accumulated for retirement are not to be drawn down during the retirement years. Under this thinking, the amount taken  into retirement acts as a 'capital base' to generate investment earnings which can be spent but otherwise should remain untouched.

This sort of thinking was evident in the public discussion of the impact on retirees of the policy taken by Labor to the May federal election to discontinue refunding of excess franking credits.

It was clear that many retirees or their advisers considered their 'retirement income' to be the dividend stream (including franking credits) generated on their share portfolio. The same mindset also underpinned some of the commentary on deeming rates for age pension means testing before the announcement that these would be reduced from 1 July 2019.

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