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Super and Team Australia

And now we return to an area of superannuation policy which not even COVID-19 is lethal enough to subdue: the fight over legislating the objective of superannuation.

Like all good but unresolvable policy debates, this one rolls around once every so often, usually pushed by the same people who have always fought for its cause.

But given how decades of superannuation policy have been turned on their head and superannuation has been transformed from a long term investment to a form of emergency cashflow relief for desperate fund members, we have to be thankful superannuation actually has no official contrived objective.

Because if it did there is no way the government could have invoked the superannuation emergency release measures they did on March 22 even if it is "the people's money".

Through this stroke of a pen the superannuation Early Release Scheme became the government's chief plan for the sector, which - depending on whether you believe Treasury or Rice Warner - will see anywhere between $27 billion and $50 billion leave the system. Electorally, it appears to have been a popular move. As at May 31, more than $13.5 billion had been paid out, around 66% of which came from just 10 funds.

And just as the private sector lauded itself for its various Team Australia plays, so too did parts of the superannuation sector days after the scheme's announcement.

FSC chair and MLC wealth chief executive Geoff Lloyd said the measures reflected the strength of the super system, "and the fact it was built for the wellbeing and livelihoods of Australians".

"This is a sensible package of temporary measures which recognises super is people's money, it's the savings of working Australians," the MLC boss said.

"In extreme times like this when people unexpectedly face financial hardship, it [superannuation] can and should be used."

Lloyd went on to outline how less than 1% of the nation's super savings would be impacted, before celebrating the fact Prime Minister Scott Morrison and Treasurer Josh Frydenberg had the flexibility to make the decision.

"Unlike many countries which don't have a mature, national, mandated retirement saving system, we are in a position to make a "Team Australia" response," Lloyd added.

But how Team Australia would the sector have been if super funds had a legal obligation to stick to a narrow objective, rendering them unable to lend a hand in difficult times?

It should be remembered that the last time Australia attempted to settle the argument over superannuation's purpose, the proposed legislation that came from it would have seen the system work towards not one but two objectives.

This, being a primary objective of providing income in retirement or supplementing the age pension, and subsidiary objectives, including facilitating consumption smoothing over a person's lifetime, managing risks in retirement, and to be simple, efficient and provide safeguards.

That definition is narrow, and it should be noted. As Australians we should be asking ourselves how the leaders of this sector and politicians ever arrived at that definition for an incredibly large pool of capital which could and should be there for Australia to build itself, take care of itself and even repair itself with.

Obviously, if in a moment of crisis like the one we are currently facing the parliament deemed the definition too narrow, it would amend the objective to ensure it was not legally impeded from asking the sector to release funds to Australians to support them in tough economic times.

However, the political implications of making such a change would be a different kettle of fish, so simply undoing the objective wouldn't happen without a brawl.

Superannuation should be saved for retirement. Individuals should avoid using it until their preservation age, wherever possible. But everybody making these policy calls already knows that.

The fact that the media releases fired off by parts of the superannuation sector moments after the government's announcements made mention of the need to protect the system and the dangers of undermining it by allowing early access to super, speaks to the sectors' ongoing sense of paranoia.

Even with no legal leg to stand on, those responses make it difficult to imagine parts of the sector not being vehemently opposed to a broader definition of super in a hypothetical world where an objective exists in order to protect their place.

Recent comments from IFM Investors chief executive David Neal add credence to the theory.

"It would be dangerous if this became a precedent that every time the government is a little bit strapped for cash, it solved the problem by allowing members to dip into their superannuation," he told the Sydney Morning Herald.

Add to this the fact that there's a retirement income review underway which could pull the rug from under the super system when its final report is released in June, and the hullabaloo starts to make even more sense.

Despite these complications, the objective of superannuation should be legislated. Even if only to ensure the sector isn't constantly looking over its shoulder. But this objective must nevertheless be broad enough to allow the sector to be onboard Team Australia.

Albeit, that will leave us with an objective without bite.

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