Wealthwise team news
We would like to welcome Robyn Mohr, Jonathan Henton and Iri Hughes to the team.
Robyn has joined as General Manager after a very successful career in the banking and insurance industry. Jonathan and Iri bring some great experience to our Customer Service team.
More Super changes coming
It would appear that the future of Super as we know it may soon change again. Recent commentary from the Morrison Government has talked about improving the efficiency and the flexibility of Super. There have also been several speeches on the effectiveness of increasing the Super Guarantee Contributions “SG” (Employer mandated contributions) from the current level of 9.5% to the scheduled 12% over the next few years. The argument for cancelling the future increases being that the economy needs the stimulus now, rather than many years down the track as and when people start to retire, and only then draw down on their Super.
The Government has referenced the recent Retirement Income Review as evidence that Super needs to be more ‘flexible and efficient’. At last week’s 2021 Policy Forum hosted by the Council on Aging (COTA), both Treasurer Josh Frydenberg and Minister for Super, Financial Services (and the digital economy) Senator Jane Hume stepped up their views on where changes might need to occur. Senator Hume was quoted as saying “The Review (Retirement Income Review) found that more efficient use of savings in retirement can have a bigger impact on improving retirement income than increasing the SG”.
The interpretation of the commentary is that “more efficient” could mean that rather than leaving behind 90% of a retirees Super to their kids, they could learn to live off their capital and put to use the extra SG contributions (the proposed increase) for other more immediate needs like buying a home.
Frydenberg’s speech certainly seemed to support Jane Hume’s view. His observations on the issue were “The retirement income system is, by definition, designed to provide retirement incomes. But the system cannot solely be about maximizing income in retirement. Were it to seek to do so, it would clearly come at considerable expense to individuals during their working lives.” “For a median earner, increasing the Super Guarantee would increase their retirement income by $33,000 but lower their working life income by around $32,000.”
He goes on to say “We must rightly consider the implications of the legislated increase to the Super Guarantee before 1 July this year – even more so at a time when our economy is recovering from the largest economic shock since the great depression”.
So our interpretation (for what it’s worth) is that the Government will back down from the already legislated increases to the SG (10% from 1 July 2021, moving to 12% over the next few years) and consider more tinkering with how your retirement savings might be invested at retirement.
Hopefully, this will be more around choices, such as the certainty of an annuity for example, but not necessarily restricted to a fixed interest option. It might also mean access to Super for the purchase of a home, something that’s already available, though to a very limited extent, to first home buyers.
Stay tuned for the next budget in May. In the meantime, we can probably expect some more broad hints from the Government on “changes to Super”.