The SMSF Owners’ Alliance, Self-managed Independent Superannuation Funds Association, Australian Shareholders’ Association and Australian Investors Association have written a joint letter to the federal government to highlight what they consider to be five major flaws in the proposed changes to super and request a post-election independent review of the calculations involved in the changes.
The first item the bodies want addressed is the retrospectivity of the $1.6 million transfer balance cap in pension phase.
In particular, they have labelled the move unfair for people who are in retirement or about to retire as they have put in place retirement savings strategies based on the previous rules that now cannot be changed or amended. “If the transfer balance cap were to apply only to future retirees, savers can decide to change their retirement income strategy during their working life, working longer as necessary to ensure they have the standard of living in retirement they have anticipated,” the groups said.
The four associations have also called on the government to apply the new lifetime non-concessional contributions cap of $500,000 prospectively.
A further point raised by the bodies is a request for the government to review its assumptions regarding the $1.6 million transfer balance cap and the claim the amount can support an income stream around four times the level of a single age pension.
The groups argued: “Analysis undertaken by Dr Ron Bewley, former head of the School of Economics at the University of NSW, shows that in order to deliver an income equivalent to four times the age pension, the transfer balance cap should be $3.2 million.”
A top-up provision has also been called for as a measure allowing retirees to better ensure they have adequate savings to fund that phase of their lives. “We suggest that upon retirement individuals may make an additional non-concessional contribution above the $500,000 cap provided their balance does not then exceed the transfer balance cap,” the groups said.
Along similar lines a case has also been put forward to double the standard concessional contributions cap to $50,000 a year for people over the age of 50.
“In the real world most people cannot make contributions up to the $25,000 cap in their early working years and this cap is inadequate later in their career when they are more able to make substantial contributions,” the groups argued.
The groups also requested a commitment from the government to submit its “figuring” to an independent public review after the election.