The financial services industry has given strong support to news of the Federal Government’s successful push to reduce the superannuation surcharge and introduce co-contributions.
The Government’s long term efforts bore fruit as the Senate passed both measures yesterday after four independents sided with the Government.
The changes, which will cost the federal budget $1.4 billion over the next three years, will now result in the surcharge on superannuation contributions dropping from 15 per cent to 12.5 per cent, over three years, for those with incomes over $90,500.
The Government will also match every dollar of eligible superannuation contributions, to a maximum of $1000, made by those earning less than $27,500 per annum. Those with higher incomes would receive co-contributions on a declining scale for incomes up to $40,000.
TheAssociation of Superannuation Funds of Australia(ASFA) says the moves could boost retirement savings for lower income earners by as much as 70 per cent if they make use of the co-contribution arrangements and said the moves were long awaited and a highly positive move towards improved retirement savings.
ASFA chief executive Philippa Smith says the moves are similar to a package developed by ASFA earlier this year when the changes were caught in Senate debates, but delivers on statements made by the Government at the 2001 election.
ASFA also welcomed the surcharge reduction which it said was unfair and inequitable and eroded the efforts of those saving for their retirement.
These statements were echoed by theInvestment and Financial Services Association(IFSA) which labelled the changes as “the best news in 15 years for Australian retirement savings.”
“The passage is a big win for lower income Australian families and will assist in ameliorating the 15% super surcharge which is such a disincentive to saving. It is important that both employer sponsored and retail super funds communicate to members the advantages of this package” IFSA chief executive Richard Gilbert says.
“IFSA will be working closely with the Democrats to see if it is possible to progress the passage of interdependency amendments in the near future, as it is clear that a growing body of opinion suggests that reform in this area is needed to provide greater legal certainty, particularly in the event of the death of a same sex partner.”
