A survey commissioned and paid for by the Australian Taxation Office (ATO) has revealed the degree to which the Government blundered by tinkering with the superannuation rules in the 2009 Federal Budget.
While the Assistant Treasurer, Bill Shorten, used the survey findings to validate the Government’s current policy approach on superannuation, including eliminating commission payments to financial planners, the survey not only pinpointed consumer and industry concern at policy changes but also the negative impacts of changes to contribution caps.
The survey findings made clear that the Government’s tinkering had done nothing to generate certainty among those approaching retirement age or those advising them.
“Among those with a greater degree of knowledge about superannuation, such as accountants and tax agents, financial planners, association representatives and consumers nearing retirement, this issue of inadequacy is compounded by the recent implementation of concessional caps,” the survey analysis said.
“This change to the system is seen to be self-defeating and to have sent the wrong message to people who require encouragement to maximise their superannuation contributions when they have sufficient disposable income to do so,” it said.
“A lot of people actively strategise to maximise their superannuation contributions towards the end of their working life and these legislative changes have invalidated this strategy. It has resulted in some people diversifying investments away from superannuation into areas where caps do not apply, and losing the tax advantages of contributing directly into superannuation.”
The ATO-commissioned survey analysis added there had been “a great deal of concern about the degree and incidence of changes to superannuation”.
“The perceived frequency of reform generates distrust and unease in planning superannuation strategies over a life cycle. Consumers are confused and disenchanted; the superannuation system seems complex enough without having to constantly monitor and understand changes to regulations.”
It said the resultant perception of regulatory risk had many people viewing superannuation as not their primary retirement savings vehicle, with the result that funds were being diverted to other investment classes (such as property or direct share holdings) where people feel a greater degree of control over their money.
“There are deep-seated fears that the age pension will be abolished and that there will be no safety net for those who have inadequate superannuation at the point of retirement. These concerns are compounded by changes such as the implementation of concessional caps which impact on longer term superannuation funding strategies.
“Across the consumer group there is worry and guilt about superannuation, and a strong sense of disempowerment,” the analysis said.
