A win is a win is a win

superannuation budget

The proposed changes to superannuation in this year's federal budget are a good example of consumer focused policy making that should happen more often.

It’s been a while since I’ve been able to reflect on a federal budget and conclude all of the measures regarding superannuation announced were positive, but such is the case this year.

I know plenty of people are accusing the government of producing a budget specifically formulated with an eye toward the next election to be held either late this year or in early 2022, but if it means sensible changes to the retirement savings system, I think we should take it when we can get it.

As was reported in the last edition of smstrusteenews, there were several major budget measures affecting this sector, including amendments to the residency rules, the scrapping of the work test requirement for people aged 74 and under, including allowing this cohort access to the non-concessional contributions bring-forward rules, the ability to commute legacy pensions and an extension of the downsizer contribution provisions.

While some legislation that is either pending or has been passed will need some adjusting for the new measure to take full effect, none of the aforementioned items in any way impacts negatively on superannuants. And we can draw a great deal of comfort from this fact.

The changes to the work test rule are probably the best example of this. For the entire time I have been covering the financial services and superannuation sectors there has been a behavioural pattern among most Australians that has never aligned with superannuation policy.

Basically it is that most Australians are likely to get married in their late 20s, then buy a house and raise their children in their 30s and 40s. It means in the main they’ll be making mortgage payments and funding school fees probably until their 50s or even 60s and it is only then that they can give making additional super contributions any realistic thought.

This timeline of financial commitments and priorities has been proven time after time through survey after survey. But still, apart from the one-off $1 million catch-up contribution granted to us by then-treasurer Peter Costello in 2007, there have been no mechanisms incorporated in the system to help individuals make catch-up super payments when they can most afford it.

Instead, the system has always been about making consistent contributions throughout your working life, and for adequacy’s sake, putting the maximum allowable concessional contributions into super every year from the time you enter the workforce. And given the standard scenario above, the majority of this period will be when no one has the spare cash to make retirement savings contributions above the super guarantee levy.

So the scrapping of the work test requirement has gone some way to allow Australians to make top-up payments to their super exactly when they are able to do so.

I reiterate this should give us all a bit of hope that the powers that be in Canberra have the ability to listen to the industry and the Australian public and shape policy in a meaningful and sensible way.

Unfortunately, I am a realist and will not be holding my breath until another occurrence like this might happen. And let’s not forget all of these announcements must be passed into legislation before they materialise.

Nevertheless, we have to take our victories when they are presented and, as the old saying goes, a win is a win is a win.


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