Playing politics with retirement savings

The two sides of politics are far from Tweedledee and Tweedledum on retirement savings policies in this election campaign. Labor has legislated changes or announced changes aimed at slowing the growth in the tax concessions for super. The Coalition has said that Labor is attacking the retirement savings of the better off. But what are the two sides proposing?

The two sides of politics are far from Tweedledee and Tweedledum on retirement savings policies in this election campaign. Labor has legislated changes or announced changes aimed at slowing the growth in the tax concessions for super. The Coalition has said that Labor is attacking the retirement savings of the better off. But what are the two sides proposing?

In the May federal budget, the government confirmed the super guarantee would gradually rise to 12 per cent. The first instalment - the rise to 9.25 per cent from 9 per cent - has been delivered for the current financial year. Under Labor's plan, the super guarantee will reach 12 per cent by 2019. If the Coalition is elected on September 7, it will also increase the guarantee to 12 per cent. But there has to be a question mark over whether an Abbott government would deliver the 12 per cent. Under the Coalition's plan, it does not reach 12 per cent until 2021 - more than two parliamentary terms away. That is plenty of time for the business lobbies to persuade a Coalition government not to honour the 12 per cent promise. Of course, getting to 12 per cent under a Labor government, though more likely, is also not assured.

The Coalition says it will retain Labor's changes to the cap or limits on how much can be salary sacrificed to super. Anyone aged 60 or more on July 1 this year has a cap of $35,000 instead of $25,000 for everybody else. The higher cap will be extended to anyone aged 50 and over as at July 1, 2014.

A big difference between the two is with the low-income superannuation contribution. The payment is worth up to $500 a year to those earning up to $37,000. It effectively gives the lower paid the same tax breaks on their 9 per cent super as enjoyed by the better paid. The Coalition says it will end the payments if it wins government because the revenues from the mining tax - a tax the Coalition says it will rescind - is supposed to help fund the payments.

Both sides of politics have said that, if elected, they will not introduce any new retirement savings policies. The Coalition says it will make no "detrimental" changes for the life of the Parliament. The government says it will have a moratorium on any further changes for five years. Presumably, that excludes the policies already announced but not yet legislated.

The most important of these includes making retirees pay a 15 per cent tax on earnings in excess of $100,000 a year where there is no earnings tax now. The government also intends applying the "deeming" rates that apply to investment income from outside super to the income earned within super. The result, should it go ahead, is that many of those drawing an income stream will be reporting a higher deemed income to Centrelink and their age pension could be reduced.