Super funds up in arms
SUPER funds have reacted angrily to budget cost-cutting, accusing the government of eroding confidence in the system.
SUPER funds have reacted angrily to budget cost-cutting, accusing the government of eroding confidence in the system.They say the budget savings may be less than expected as high earners able to afford sophisticated tax advice look elsewhere.The government announced in the budget that it would save about $2.4 billion by doubling the tax rate to 30 per cent on concessional contributions for people earning more than $300,000.It would also defer a special deal that would have allowed older workers with less than $500,000 in super to contribute up to $50,000 a year double the $25,000 for everyone else.The chief executive of the Association of Superannuation Funds of Australia, Pauline Vamos, said the deferring of this deal would be very disappointing for older workers, particularly women trying to make up for low account balances.While a small proportion of baby boomers have very healthy super accounts, a recent report by the Australian Centre for Financial Studies found average superannuation balances for men in the workforce aged 58 to 62 was about $210,000 in 2010. For women it was $95,000.The chief executive of the Institute of Superannuation Trustees, Fiona Reynolds, said: "We need to remember that most older workers have only had the benefit of 9 per cent compulsory super since 2002, and many have seen their retirement savings hit by the global financial crisis."She said this was the fourth change to the contribution caps since 2006.There was a real risk that many people would mistakenly contribute too much and be hit with harsh tax penalties, which occurred last time the contribution caps were cut. This year, everyone over 50 can contribute up to $50,000.Andrea Slattery, chief executive of Self-Managed Super Funds Professionals' Association, said she was concerned that these measures could also be the thin edge of the wedge.Ms Vamos said reducing the incentives to save in super would erode confidence, and people were losing heart in the system. She said this could lead to a snowball effect, in which less money was invested in the economy through super and future taxpayers would be required to fund a much bigger burden.She called for a parliamentary inquiry into tax-advantaged investments to ensure the retirement savings system was not being undermined.What the government saw as one-off revenue measures would encourage some to seek low-taxed investments outside superannuation.