Why should I contribute to Superannuation when it could all change?
This is such a common question we are hearing at the moment.
“The government is always changing superannuation,” we hear people say. “It is one of my biggest concerns.”
People are always uneasy about change and especially when it comes to their finances.
Yes, the government has made changes to superannuation. And to a lot of people these seem to happen far too often. But the government knows it cannot make changes that would be detrimental to superannuation fund members.
The government’s recent “Tax and Super” Budget 2016-17 document details the recent changes. This has created a lot of discussion in the media. Hardly a day goes by when some commentator is not talking about tax and how the government needs to address its future direction to cope with Australia’s changing age profiles.
The key concern is the decline in traditional working age Australians compared to those over 65. At the moment, for every person over the age of 65 there are 4.5 people aged 15 to 64. But that figure is expected to drop to 2.7 by the year 2055.
This will have significant implications for age pension payments and retirement incomes, as well as how they are funded. You can clearly see that all Australians will need to change their retirement income strategies in the future. The government sees itself as the key driver in this area.
Providing funds for people to live off when they retire is the key to all retirement saving strategies. And the government is well aware that everyone is getting older. So the Government is encouraging everyone to put more into their superannuation, and will need to keep doing so for many years to come.
This means the last thing it can afford to do is make superannuation look unattractive. Even with the recent super reforms limiting the amount of super that can be transferred into a retirement phase pension account to $1.6M, this is still a very generous amount of tax free super for most Australians.
While the government remains focused on expanding its tax collection measures to cover long-term issues, the driving force will be to strongly encourage Australians to save for their own retirement. And self-funded retirees are a cornerstone in delivering effective retirement incomes.
Changes and fine tuning of the existing system will happen, however any government changes should continue to support self-funded retirees.
If you are a self-funded retiree you can be confident about the government’s changes. But in any case, from a tax perspective, superannuation contributions will always be attractive.