We are taught from a very young age life is full of challenges and that through determination and perseverance we can forge a strong and successful future, and if we are lucky enough, for our family as well – our life’s plan.
Having a strong financial self-funded retirement is part of this plan. An extremely important part. But only if we are allowed to. Excuse me? Allowed to?
Superannuation in Australia was introduced by the government to encourage people to accumulate funds enabling them to have a comfortable retirement. The choices were either to take it as a lump sum or as a pension. Only in Australia was this type of benefit paid as a lump sum, the preferred option at that time as the dominating sentiment was to spend your retirement savings and live off the age pension once all the money was gone.
In 1983, changes to superannuation came about through an agreement between the government and the trade unions. The trade unions agreed to forego a national 3 per cent pay increase if that money was paid into the new superannuation system for all employees in Australia. This was to be matched by employers’ contributions, that is, 3 per cent employees and 3 per cent employers. This was supposed to result in a total of 6 per cent, but as I recall that didn’t happen. Forgotten again?
In 1992, the Keating government brought in the compulsory employer contribution scheme, which was to address Australia’s retirement income dilemma, the dilemma being an increasing number of people shifting into the retirement phase of their lives and placing greater pressure on the age pension and, in turn, the Australian economy. Maybe we need to be self-funded in retirement.
Then came the proposed solution incorporating a three pillars approach to fund out retirement being:
- compulsory employer contributions to superannuation funds known as superannuation guarantee (SG) contributions,
- further contributions to superannuation funds and other investments, and
- if insufficient, a safety net consisting of a means-tested government-funded age pension.
So, the key here was to try to become a self-funded retiree. Well good luck with that.
The Keating government intended to bring in the SG starting at 1 per cent and rising to 3 per cent. This was cancelled by the Howard government in 1996. This didn’t matter too much as it was badly planned and badly presented.
The SG contributions were to increase up to 12 per cent by 1 July 2019, but have remained at 9.5 per cent. Forgotten again?
Getting enough into super for retirement with continual changes to the rules has always been the challenge. The priority to contribute more money into super only comes after the house is paid off and the children are independent. People are then looking to see the assets in their SMSF, or other type of super fund, grow. Good luck with that.
Most of the negative amendments to super to date have been made by coalition governments, but now it is possibly Labor leader Bill Shorten’s turn. If he becomes prime minister, he intends to hit self-funded retirees and SMSF trustees for all the wrong reasons.
Shorten presents as the people’s friend coming to restore fairness, but to whom? Not self-funded retirees or SMSF trustees.
If Labor’s policies applied across all aspects of investments and saving, they could be justified, but when one sector of the market is targeted because it appears to be a soft target, it is simply opportunistic. Playing off the millennials against the baby boomers is wrong. Taking from those who have worked hard and accumulated, and giving it to whom? I’m not sure even Shorten knows.
As an SMSF owner don’t let yourself be forgotten.
A not-for-profit advocacy group was established in 1998 specifically for trustees of SMSFs so they are not forgotten or remain a soft target. This group is the Self-managed Independent Superannuation Funds Association (SISFA). Every time a trustee becomes a member of SISFA, they become less forgotten. Find out more at www.sisfa.com.au
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