Accumulated super savings should not be considered as an inheritance for family members, but should be used to provide retirement income, according to a Liberal senator and an opposition frontbencher.
Liberal Senator Andrew Bragg and opposition financial services spokesman Stephen Jones both agreed the super system was not designed as a vehicle to pass on savings as an inheritance or bequest, but said changing that thinking required more work from government and the financial services market.
Speaking with SMSF Association chief executive John Maroney as part of the association’s SMSF + Investor Expo late last week, Bragg said underspending of retirement incomes ran counter to the design of the system.
“Superannuation was not designed to be a tax haven. Even though it has a tax-preferred status and the bulk of concessions accrue to higher-income earners, it was not designed to be a shelter,” Bragg said, adding the government would not move against those who had made plans to pass on retirement savings.
“We don’t believe in retrospective changes. At the last election we had a debate over franking credits and we won’t be having that debate again as we can’t pull the rug from under people who put in place their arrangements in good faith.
“In terms of the stocks that are already in the system, it is very difficult to pull the rug or make serious rule changes where people have made those judgments under the basis of the law.”
Referencing the $1.6 million cap on super that took effect from 2017, he said: “What we can do in the future, and the 2016 budget changes did this, is put a cap in place so people can’t accumulate funds in the tens of millions of dollars, which won’t be possible in the future.”
Also speaking with Maroney as part of the event, Jones noted some retirees die still holding a large proportion of their retirement savings.
“For some people, it is a desire to hand something on to kids and grandkids, but that is not the purpose of superannuation and tax-assisted retirement savings,” he said.
“Some of it is about longevity risk and ensuring there is some money aside for next year and the year after that.”
Pointing to the findings of the Retirement Income Review and a number of preceding reports, he said: “There is also an issue, that has been pointed out in a number of reports over the past two decades, that we have a very thin market for retirement income products.
“Work on the Retirement Income Covenant has stalled, but we need to be providing more options for retirement income streams to retirees now they are retiring with more money than they ever have in our nation’s history.”''