Big wealth managers are set to escape any fallout from the government's plan to raise taxes on retirees with superannuation balances above $2 million, as the increase is tipped to mainly affect the booming self-managed sector.
Putting an end to weeks of speculation, the government said on Friday it expected to raise an extra $900 million by raising taxes on the wealthiest 0.4 per cent of retirees, and changing tax breaks for voluntary contributions.
While executives in super funds had been bracing for an overhaul, the changes were more modest than some had feared.
Retail funds, such as those controlled by AMP and the big banks, are unlikely to feel much impact from the tax rise because they tend to manage accounts with balances of less than $2 million.
Challenger is also tipped to be a big winner from the government's move to extend tax breaks on annuities, a product in which it specialises.
Shares in Challenger jumped 4 per cent in a falling stockmarket, while AMP shares closed flat after early gains.
Retail funds, including Westpac's BT or Commonwealth Bank's Colonial, manage just over a quarter of the nation's $1.5 trillion in super savings, figures from the financial regulator show.
Deutsche Bank analyst Kieren Chidgey said the extra tax would lower the amount of funds under management by just 0.02 per cent a year - "a negligible amount and a considerably better outcome for the wealth management industry than feared".
Moreover, Mr Chidgey said retail funds had relatively few super accounts with balances above $2 million, so would escape most effects of the tax increase.
The rapidly growing self-managed sector, which tends to house funds with much larger balances, will likely be most affected by the changes.
While the centrepiece of Friday's changes was the removal of a tax exemption for wealthy retirees, the key move for Challenger related to deferred lifetime annuities, which allow people to purchase an income stream for the rest of their lives.
From July next year these products will receive the same concessional tax treatment as super does during the pension phase.
"The extension of tax exemptions to [deferred lifetime annuities] will improve their net return and should spur significant growth," Mr Chidgey wrote.
Challenger's chief executive, Brian Benari, said the changes levelled the playing field, and would people guard against the risk that they run out of savings in retirement.
"All Australians need secure lifetime retirement income and many could be retired for 25 years or more," Mr Benari said.
The superannuation lobby also backed most of the changes, despite for-profit funds saying it would be difficult to implement some of the government's plans.
Pauline Vamos, chief executive of The Association of Superannuation Funds of Australia, said it was good to see clarity and "long-term thinking" on super and she was now hoping for a quiet budget night next month.
"The government promised that the majority of people would not be impacted and they have made good on that," she said.
The chief executive of the union-linked Industry Super Network, David Whiteley, said the tax rise on retirees with balances of more than about $2 million would affect a "tiny" share of the population.
Financial Services Council chief executive John Brogden had threatened to run a television ad campaign against the government over its super plans, and said this remained an option for the future.
"We do want to make it clear to this government and future governments, that if there are sovereign threats to the savings of Australians in the future, we will consider again running a campaign to ensure that the 10 million Australians who have superannuation will have their superannuation protected," he said.