A matter of super confidence
SIGNIFICANTLY, the Federal Government’s response to the Henry tax review, contains no proposed measures which would undermine confidence in the superannuation system.
In its response, the Government appears to show sensitivity to the reality that any change to the possible financial detrimental of fund members damages confidence in superannuation.
Confidence is a particularly delicate issue in superannuation given the amounts of members’ savings involved and the inability to access the money before retirement. (Except with a transition-to-retirement pension if over 55.)
The Government did not respond, for instance, to the Henry review’s recommendation to tax concessional super contributions at marginal tax rates.
If acted upon, that particular recommendation would have concerned higher income earners who are still coming to terms with the substantial cutting of the annual caps on concessional contributions from 2009-10. And it would, no doubt, have dented long-term confidence in superannuation.
Financial planners often speak about “legislative risk” with superannuation. And as with any investments or investment vehicles, confidence in superannuation is a precious commodity.
While on the subject of confidence, the Government proposes in its response to the Henry review to allow fund members over 50 with super balances below $500,000 to continue to have concessional contribution caps of $50,000 after July 2012. (From that date, the $50,000 cap for members over 50 was due to be substantially cut again to fall into line with the much-lower cap for members under 50.)
This is an acknowledgement by the Government of the plight of those members – such as women who interrupted their careers to raise children – who often want to catch-up with extra-large contributions in their final decade or so before retirement. The halving of concessional super contributions cap had been a superannuation confidence destroyer and the Government has gone part of the way to rectify this position.
The Government’s other super proposals released yesterday include: gradually increasing the SG contribution to 12%; making a $500 Government super contribution to low-income earners from July 2012 and lifting the SG contributions age limit from 70 to 75 from July 2013.
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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.