The immediate need for a definition of superannuation to be enshrined in federal legislation is becoming clear as more ideas are floated about how to best use the savings pool.
Western Australia Senator Chris Back has proposed that super could be used by university graduates to pay off Higher Education Loan Program (HELP) debts that would in turn boost the government's consolidated revenue.
But the idea is at odds with superannuation industry groups because, in their view, fund members would be acting in the short-term to clear a debt and not thinking about a potential greater reward at retirement - something the super system has been geared towards since inception.
Australian Institute of Superannuation Trustees (AIST) executive manager policy and research David Haynes said super was not the solution to plugging budget holes related to student debt.
"Even when the superannuation contribution rate eventually reaches 12%, most young Australians will need every cent of their superannuation to achieve adequate levels of income in retirement," Haynes said.
"Using superannuation for any purpose other than retirement could see an increased reliance on other government measures such as the Age Pension."
The Association of Superannuation Funds of Australia (ASFA) said before any proposal to extend the uses of superannuation is considered there should first be an agreement on its purpose.
"Any proposal allowing early access to superannuation to address the funding of pre-retirement needs comes with a number of problems, the most impactful being the exponential loss of compound interest within a long-term investment like super," ASFA chief executive Pauline Vamos said.
Vamos said if a person aged 30 on a salary of $60,000 per year took out $25,000 to repay a HELP debt, their final retirement savings at age 67 would be reduced by about $54,000. It would take super savings well below ASFA's estimated amount required to maintain a comfortable standard of living in retirement.
"It also does not make financial sense for an individual to pay off a debt that attracts interest at around 2.5% per year by reducing their superannuation savings which have investment earnings of around 7% a year on average," Vamos said.
ASFA has flagged that the idea may also increase super's cost to the government due forgone tax income, as well as place pressure on ballooning health and aged care costs.
At a doorstop interview in Canberra yesterday, Federal Treasurer Scott Morrison reiterated his line that super is aimed at being independent in retirement.
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, Age Pension
, Association of Superannuation Funds of Australia
, Australian Institute of Superannuation Trustees
, David Haynes
, Federal Treasurer Scott Morrison
, Pauline Vamos
, Western Australia Senator Chris Back