TheInvestment and Financial Services Association(IFSA) has welcomed changes to the superannuation and retirement income system following an announcement by the Federal Treasurer Peter Costello this morning.
Under the new system, to come into effect from July 1 this year, the work test on who can contribute to superannuation will be removed for anyone under the age of 65 and that from July 1, 2005, people will be able to access their superannuation as a non-commutable income stream once they have reached their preservation age.
The Government has also reviewed the current social security asset test exemption for complying income streams and will reduce the current 100 per cent exemption for purchased complying income streams to a 50 per cent exemption for products purchased on or after September 20, this year.
The Treasurer says the Government will be consulting with the industry on an appropriate new work test for those aged 65 and over as well as the non-commutable income stream arrangements which will apply to those people who choose to continue working past retirement age.
IFSA chief executive Richard Gilbert says the changes are based on demographic and economic data revealed in the Government’s Intergenerational Report and addresses the retirement incomes needs of those who move in between retirement and employment.
He says individuals who work part-time under current arrangement hold an allocated pension must cease that pension, which is inflexible but the removal of the work test will make it easier for workers to move into and out of retirement as necessary.
Gilbert also says the adoption of growth pension will provide retirees with more options to maximise future income flows and can control capital and take a required income stream.
TheAssociation of Super Funds Australia(ASFA) has also given approval to the moves but says they do not go far enough in tackling how workers can build sufficient retirement savings from the outset.
ASFA chief executive Phillip Smith says the association is pleased with the announcement “but there is a glaring omission – the lack of any savings incentives and initiatives to ensure Australians acquire a more adequate retirement nest egg”.
Smith says the Government needs to partner middle Australia in building savings considering the growth in ageing populations.
“The big as-yet unmet challenge is how to ensure that retired people will be able to meet minimum expectations for a comfortable lifestyle in retirement, and how to equip us as a nation to cope with the impact of ageing demographics and the financial pressures that will bring.”
“It is important that the working population is encouraged to save now, rather than rely on the taxpayers of the future. Not everyone will have the health or opportunities to continue working into their seventies.”
The Opposition Treasury spokesman Simon Crean has been less forgiving, stating these moves are only the Government fulfilling promises it made three years ago during the 2001 election campaign and that Australians have a right to know why it has taken three years for the Government to move towards implementation.
