Australia’s superannuation system faces an overhaul, with the government looking at ways to block the early release of retirement money.

Treasurer Jim Chalmers proposed further protections for superannuation to safeguard retirement savings in a speech on Monday.

Australians pulled out about $36 billion from their retirement funds during the pandemic.

• Raiding retirement: How a million Australians emptied their super funds

Dr Chalmers said the early withdrawal of billions was a “disastrous policy” from the former Coalition government.

The Coalition policy was intended to give a financial buffer to those impacted by COVID-19 shutdowns.

The government will work towards enshrining the definition of superannuation in law to preserve retirement savings.

“This made us vulnerable to wrong turns and wrong decisions,” Dr Chalmers said on Monday.

“It moved us further away from where we need to be – better living standards in retirement for as many Australians as possible.”

The proposed definition is: “The objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

Dr Chalmers said legislating the definition would provide certainty and a common objective for super funds.

The Coalition has already hit back at the government’s plans.

Barnaby Joyce, a former deputy PM, defended the former government’s decision to allow early access to funds. He said it intended to give people access to “their money”.

“They want to buy their own house, a lot of people want their own business … Superannuation is a great program, but I don’t think you should rule out letting people have access to their own money,” Mr Joyce told Seven’s Sunrise on Monday.

Opposition frontbencher Dan Tehan repeated the view.

“What Jim Chalmers isn’t saying is that your super will always be taxed a higher rate under Labor, there will be less transparency about what happens to your super under Labor,” he told Sky News.

“If you need it to be able to buy your first home, then you should be able to access your super, and we have a good, sensible policy that allows young people to be able to do that.”

Independent senator Jacqui Lambie said being able to access her super – after 20 years “fighting government departments, nearly making myself bankrupt” – had meant she could keep her home.

“It is not as black and white as [the government’s view]. My kids and I would have been left homeless, let’s have a chat about that,” she told Nine.

“I thought we already knew out there that this is for your retirement, but there are things that happen in our lives where that money may come in handy … just to keep us afloat.

“Especially in the next two years if we are going into recession, if there are guys out there who can dig in to make sure we keep the roof over their head to continue to pay their house rates, we have to be a bit more flexible than that when we are going through tough times.”

Elsewhere, the government is also considering changes to super tax concessions that can be used to amass wealth and are weighing on stretched government finances.

The consultation paper released on Monday said the focus on delivering income “makes clear that the purpose of superannuation is not for minimising tax on wealth accumulation or enabling retirees to leave tax-effective bequests”.

The paper also outlines the importance of a “sustainable” superannuation system that “should be cost-effective for taxpayers in achieving retirement outcomes”.

“While all Australians can save for their desired lifestyle in retirement, this outcome is influenced by personal circumstances and expectations and is ultimately constrained by the need for equity and sustainability in the system,” the paper says.

“Beyond a certain level of income, additional government support through tax concessions is not necessary or appropriate.”

Under concessional taxation rules on super, anybody can pay money into their super fund and it is taxed at 15 per cent – much less than the 45 per cent marginal rate high-income earners pay.

Some groups have called for a limit on how much can be saved within the super system to make the system fairer.

The Association of Superannuation Funds of Australia welcomed the proposed objective as “the next chapter in the Australian superannuation story”.

ASFA chief executive Martin Fahy said the proposed objective placed preservation, retirement income, equity, sustainability and a dignified retirement at the heart of superannuation policy.

“The government has proposed an objective that can underpin much-needed policy stability and help anchor future policy debates in ensuring our age pension remains affordable, that superannuation savings are preserved to retirement and that the system delivers in an equitable manner for women and low-income earners,” Dr Fahy said.

-with AAP

The New Daily is owned by Industry Super Holdings