Counting cash is not a fab future
Just when super comes good, there's talk of unmentionable things being done to it.
It's clawed back everything lost in the wake of the global financial crisis. All is forgiven, sort of.
Shares, after adding dividends, are within cooee of their peak.
Super has also been helped by rallies in property trusts, bonds, and international equities.
But a cash-strapped Treasury is on the warpath.
Surely the better super does, the fewer retirees will be availing themselves of the pension. So what's Treasury on about?
Unfortunately the self-funded don't come cheap, either. According to Treasury, their super tax concessions cost $32 billion a year and are rising faster than a Queensland flood. It costs almost as much as paying pensions. Worse, topping up your super at some expense to the budget and splurging it at 60 to be suitably dressed down for the pension five years later has become a national sport. It'll be over Treasury's dead body for this to go on.
Thankfully super changes are never retrospective. You might get less, but it'll still be more than you would have got elsewhere.
So I say never look a gift tax break in the mouth. Anyway, it's a misconception that money in super has to go into shares.
Not at all. Your typical fund offers plenty of options, perhaps too many.
As long as you earn under $300,000 a year, not exactly hard, the tax is only 15 per cent on what goes into super if salary-sacrificed (nothing if a voluntary contribution because you've already paid tax), plus 15 per cent on the earnings.
Retire at 60 and you can take your money out tax-free.
Mind you, part of the media speculation is that this might change but, really, can you see the government, especially this one, getting away with a special tax on baby boomers? The biggest voting demographic?
If you can abide the pettifogging and, let's face it, mostly incoherent rules, much less mind packing your money off to some kind of financial boarding school, then super is an unbeatable tax dodge.
An example is last year's best-performing super fund for Australian shares, Perpetual WealthFocus, though according to SuperRatings over seven years it was pipped by AustralianSuper. It returned almost 24 per cent, after tax and fees. Would you have got that outside super paying normal tax? I don't think so.
Ditto for Commonwealth Bank Group Super, which had the best international shares fund - a return of 17.9 per cent.
What if you're happy to sit in cash? Well, you can in super, too, with the cash option, or set up your own fund.
For example, AMIST Super's cash fund returned 5.2 per cent last year. On the top marginal rate outside super, you'd barely have got half that after tax.
So why would you have all your super in cash - in reality, term deposits and online savings accounts? Oh, I know. You can't lose your money.
Since the GFC, a good cash-only super fund has returned almost 5 per cent annually, a king's ransom considering the alternative is a share fund losing 4.5 per cent a year.
Truth be told, 2008 has a lot to answer for. It was such a shocker, it's pulled down the average return for shares and made cash look good.
Don't be fooled by that. Cash doesn't have staying power. It can't grow, and even within super it's at a tax disadvantage to fully franked shares.