The 2012 federal budget was disappointing for retirees and those saving for retirement, and further changes to superannuation would undermine the confidence of Australians in the system, industry associations said last night.
The changes included tax concessions through higher income earners and the deferral of the contribution caps.
From 1 July 2012, individuals earning more than $300,000 will have the tax concession on their contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy).
The start date for the review of contribution caps has been postponed until 2014/15.
FPA chief executive Mark Rantall told InvestorDaily such a move would lead to confusion and unintended outcomes, with consumers starting to doubt the long-term integrity of the super system.
“We would have liked a greater encouragement for people to save for their retirement,” Rantall said.
“We understand the short-term fiscal pressures and the need to bring the budget back into balance, but clearly this has ended up in taking away from small businesses and super contributions and given back to low-income earners.”
Continued tinkering with superannuation and superannuation caps ran the risk of the Australian community losing trust in the superannuation system, according to Association of Financial Advisers (AFA) chief Richard Klipin said.
“[It could result in] investing outside the super system, so it’s time for some leadership in that regard,” Klipin said.
In addition, he said the financial services sector had been crying out for stability and certainty.
“If it is ultimately seen as a cash cow in the minds of consumers to be dipped into by government when they need to fill budget holes, this ends up being counter to the intent,” he said.
“Ultimately the savings had to come from somewhere and the government has made a call to get it from the superannuation system.
“The AFA’s view is that it’s inappropriate and that’s not the right place, but they’re the government and they’ve made the call.”
Financial Services Council director of policy Martin Codina said the budget measures would significantly undermine confidence in the superannuation system.
“The clear message from the industry to government is it’s time to stop the constant tinkering with superannuation, which is only going to increase the reliance on the aged pension. In doing so it will place a higher tax burden on future taxpayers,” Codina said.
In total, the government since 2008 had made nine changes to superannuation and collectively those changes had taken $7.8 billion out of Australia’s retirement savings, he said.
“From our perspective we would have preferred the government not introduced these changes to the superannuation system. It is disappointing that the government has used Australia’s superannuation as a means to fund other political priorities,” he said.
