Industry breathes a sigh of relief

A superannuation industry battling fatigue will be relieved by the Rudd government's commitment, following the Coalition's earlier pledge, to hit the pause button on further changes to super.

Policy settings are now in place that will probably result in most people less than 40 ending up with adequate retirement savings. That's because both sides of politics say they will increase the super guarantee to 12 per cent from 9.25 per cent now.

Under the government's plan, the 12 per cent will be reached by July 1, 2019. That is why those less than 40 will benefit - they will have at least 15 years of a 12 per cent super guarantee.

Under a Coalition government, the super guarantee will rise more slowly and will not hit 12 per cent until 2021. That is more than two parliamentary terms away and gives plenty of time for business lobby groups to persuade a Coalition government not to implement the full increase.

The government's plans to slow the growth of superannuation tax concessions are good, even if they do not go far enough. Those earning more than $300,000 a year will pay a contributions tax of 30 per cent instead of 15 per cent.

From July 1 next year, under the government plan, retirees will be taxed 15 per cent on annual earnings in their super above $100,000, compared with no tax at present. The government says this should only affect those with retirement savings of $2 million or more.

To help low-paid workers save for retirement, the government offers a tax cut of up to $500 a year to those earning up to $37,000. This, in effect, removes the 15 per cent contributions tax for low-income earners. The Coalition has said it will remove this benefit, if elected.

Those who don't have long to go before retirement can take advantage of the increased limit for salary sacrifice into super - $35,000 this financial year for those aged 60 and over at the start of 2012-13.

For everyone else, the cap is $25,000. From July 1 next year, the $35,000 limit will apply to those aged 50 and over. The Coalition supports the higher caps.