The SMSF Association has produced compelling evidence that the Federal Government should increase the concessional contribution cap for people aged 50 and over and extend the carry forward of concessional contributions.
SMSF Association Managing Director/CEO Andrea Slattery says research undertaken for the organisation by the actuarial consultancy firm Rice Warner “conclusively shows” that people only begin making significant voluntary contributions to superannuation from their mid-50s onwards.
“The research confirms what the Association has long been telling policy makers: that there is a sharp difference between compulsory and voluntary contributions to superannuation – the former increase gradually over time while the latter jump dramatically in the years leading to retirement.
The Rice Warner research used a sample of 14,351 SMSF members provided to the Association by BGL, a leading SMSF software provider.
Slattery says: “This research graphically shows why people aged 50 and over need to have a more generous contribution cap than the $25,000 that will apply from 1 July 2017.
“The Association has argued for the Government to retain the current $35,000 cap for older workers and notes that even a compromise of a $30,000 cap for those over 50 years will still benefit fund members trying to save their superannuation savings to achieve a dignified retirement.”
The research highlights the significant impact that voluntary contributions can have on a fund member’s superannuation balance.
The research also highlights that if the carry forward concessional contribution limit was increased from a balance of $500,000 to $750,000 it would benefit 13% of the members in the sample, of which half would be female. This measure alone would go a long way towards building adequacy for women.
Slattery says: “The Association believes that this change would increase the effectiveness of the Government’s carry forward policy and deliver better results for people who have had volatile incomes throughout their careers and are trying to build adequate retirement savings.
“These important policy changes will allow a greater opportunity for people to achieve a secure and dignified retirement by building their retirement savings.
“It’s also significant that women’s contribution patterns show that when they are in the workforce they are engaged with their superannuation in an SMSF, and this particularly applies when they are in the 60-plus age group.”
Rice Warner CEO Michael Rice said the underlying focus of the research was to measure the impact of recently proposed legislative changes to tax treatment in superannuation on SMSF members and potential refinements.
“The three most significant of those proposed legislative changes were: the introduction of a $1.6 million cap on the amount that can be transferred from accumulation accounts to pension accounts, the reduction of the concessional contribution cap to $25,000 from $35,000 and the introduction of a $100,000 yearly non-concessional contributions cap (restricted to those with balances under $500,000).
“The research shows that the proposed changes will have a material impact on the SMSF population and will restrict members’ ability to save in superannuation.”
For a copy of the research report, click here.
About the SMSF Association:
The SMSF Association is the authoritative voice for the self-managed superannuation fund sector. The Association, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs as well as trustees to assist them become better educated and informed. The SMSF Association is an advocate for integrity of the SMSF Sector, including the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice to make the most informed decisions.
About Rice Warner:
Rice Warner is a trusted partner to many successful organisations operating in Australia’s dynamic financial services sector. Valued clients include superannuation funds, financial institutions, fund managers, life insurers, administrators, financial planning licensees and providers of financial software. Since 1987, our firm has built an unrivalled reputation for providing fact-based guidance to industry participants, underpinned by a rich heritage of independence and informed opinion leadership.
Contact for Interviews
SMSF Association Managing Director/CEO
M: 0417 898 317
Rice Warner CEO
P: 02 9293 3704
Contact for Media
M: 0409 585 979