Changes to the Australian superannuation system has sparked anger from the financial services industry.

 

The Government announced in the Budget it  will achieve a savings of $1,459.5 million over the forward estimates period by deferring the start date of the 2010-11 Budget measure Stronger, fairer, simpler tax reform — increasing concessional contribution caps for individuals over 50 with low superannuation balances by two years, from 1 July 2012 to 1 July 2014.

 

Under the higher concessional contributions cap measure, individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under the general concessional contributions cap.

 

The two-year deferral means that for 2012-13 and 2013-14, all individuals will be able to make concessional contributions of up to $25,000 per year as permitted under the general concessional contributions cap. In 2014-15, the general cap is likely to increase to $30,000 through indexation, and the higher cap would then commence at $55,000.

 

The Financial Services Council (FSC) has said that the move to take funding out of the retirement savings system will significantly undermine trust in the super system.

 

“This Budget hits every saver aged over 50 years. Cutting the concessional contribution caps from $50,000 to $25,000 for two years undermines all Australians planning for retirement,” Martin Codina, Director of Policy at the FSC said.

 

“The Government has again confirmed that it is willing to use retirement savings to pay for other political objectives. This is the 9th time since 2008 the Government hsa changed the rules, equating to $7.8 billion less in retirement savings.”

 

The Chairman of AMP Peter Mason has  called for the government to stop ‘tinkering’ with the Australian superannuation system, and criticized the budget decision to delay reinstating the $50,000 superannuation concessional tax cap for those over 50.

 

Speaking at AMP’s Annual General Meeting, Mr Mason said continual changes to the super system had undermined people’s confidence in it for their long-term planning.

 

“Constant changes to Australia's superannuation system, as we saw again in Tuesday's budget, undermine people’s comfort in saving within this system.

 

“We know from experience that any change, even when it doesn’t impact them directly, unsettles people, and makes them anxious about the future. The greatest contribution that the Government can make right now is to provide the certainty and security Australians need so they can save with confidence in the future,” he said.

 

Mr Mason said the delay in reinstating the $50,000 superannuation concessional tax cap for those over 50 would act as a disincentive for people to save for their retirement at the very time they were in a position to do so.

 

“Ironically, this constant tinkering by the Government risks undermining the very system Labor established, and which is now so widely admired around the world.

 

“Superannuation is a long-term response to a long-term demographic and economic challenge. It needs to be managed for the long-term, not continually modified to meet short-term budgetary objectives.

 

“It also needs to be a system that manages equitably the intergenerational challenges created by an aging population, without transferring an unfair burden to future generations of taxpayers – our children and grandchildren.

 

“That way, Australia will remain the envy of the world, with our people enjoying the retirements they deserve, and our nation capable of funding the infrastructure we need to provide an attractive standard of living for everyone.”