“Australia’s superannuation system has become a cornerstone of saving and planning for retirement in a relatively short period of time, but it still requires certainty and commitment from the government in order to avoid people falling back on the pension for their retirement income.
“Constant regulatory risk will only lead to people to considering less enduring ways to save for retirement. We need to encourage contributions into super and have future generations see it as the most effective savings vehicle.
“Given that life expectancy is only likely to increase, government could be creating a long-term social security issue by any measure that dissuades the longer term savings.
“What’s more, the mooted reduction of the cap to concessional contributions to $20,000 will only have a marginal effect on revenue, but a significant effect on people’s perception of how they should see super.
“Surely we want people being fully funded at retirement rather than generating their retirement income from the public purse.”
Charlie Viola also took issue with the flagged abolition or limiting of transition-to-retirement pensions.
“This strategy has been fantastic for people who are genuinely transitioning from the workforce.
“It allows them to work part time with their existing employer and to start accessing super to cover the shortfall.
“This may have created a tax-free loophole for people still in full time employment but unwinding these arrangements now would be harmful and unfair to those who put them in place under a different set of rules.
“If transition-to-retirement pensions are abolished then the government will need to seriously review the conditions of release definitions so as not to result in unwanted consequences.
Charlie Viola also believed that the Opposition’s superannuation plans may not have the impact they hope for.
“Adjusting the contributions tax from 15% to 30% for people earning over $250,000 is a minor adjustment only; it’s already 30% for those earning over $300,000. The revenue increase will not be significant.
“Taxing super income over $75,000 at 15% is effectively a re-introduction of the $100,000 limit that was set to be established and then quickly disregarded as unworkable and creating the wrong message for retirees.
“It will likely only effect people with over $1.5 million in super – we’re talking a very small number of individuals here – and would be a measure very hard to administer. In fact the administration costs may outweigh the benefits.”
For further comment please contact:
Charlie Viola, Partner, Pitcher Partners Sydney, 02 8326 7798