There is much a-do about the proposed $3,000,000 cap on individual super balances and its impact on the retirement landscape.
The planned start date of the proposed cap is not until July 2025, so until then it is business as usual. Even after the changes are legislated (if they become legislated), not much will change for the vast majority of people.
To the smaller percentage of people who will be affected, there will need to be a conversation with your financial adviser on the percentage of assets allocated within and without super.
But quite aside from the here and now, it is worth considering the wider consequences of this change, and indeed all the changes still to come.
The Superannuation Objective Bill 2016 recommended enshrining the objectives of the superannuation system in legislation. Assistant Treasurer, Kelly O’ Dwyer noted that this “is critical to securing trust and integrity. It is also a means for increasing confidence in the superannuation system as a whole.”
Yet there has been a plethora of changes to the super over the last decade with a large proportion relating to contributions, tax and other concessions including: Transfer Balance Caps, changes to contribution caps, catch-up concessional contributions, the removal of the work test, the Commonwealth Seniors Health Care card assessments, further reduction in the age limit for downsizer contributions, and the First Home Super Saver Scheme to name but a “few”.
Research after research concludes that millennials are uninterested in saving for retirement, placing priority over saving for their first home or travel.
However, when they do start thinking about retirement planning, they will want control, simplicity, and stability, all of which our complex super system is currently lacking.
Add to that the drudgery of paper based forms, absence of instance access to information and generic communications, there is little incentive to galvanise the younger generation to see Super as a highly effective means of retirement saving.
Aside from millennials, is there a risk that the wider population will supersede super and opt for alternative methods of retirement wealth procurement, or simply refrain from making any voluntary contributions?
And if that’s the case, could the super changes of today undermine confidence in the system as a whole and consequently result in increased reliance of the Aged Pension in the future?