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Government policy of capping concessional superannuation contributions has been labelled “counterproductive” by Rice Warner Actuaries in its latest Touchstone report Surviving Longevity.
The Rice Warner report argues that the current concessional contribution cap ($25,000, or $50,000 for those aged over 50) deters Australians from contributing extra money to their superannuation and forces them into other forms of savings.
“Government policy should be steered away from fiscal tampering and aimed at ensuring that everyone can accumulate as much as possible (up to some reasonable threshold). Then, fewer Australians will become dependent on the state in retirement,” the report stated.
Currently, many Australians run out of money in the first fifteen years of retirement and are forced to fall back on the age pension.
According to the report, the argument that increasing the contribution threshold favours higher income earners is made invalid by the fact that a significant number of these people will not benefit from a working lifetime of accruing superannuation at the superannuation contributions guarantee rate, and they will want to catch up.
The contribution rate needed to provide a lifetime pension of 60 per cent of salary is 20-30 per cent of salary over a full career — an amount that most Australians are not achieving.
