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05 Jun 09 On the super changes in the budget

MEMBER 2 writes: "There needs to be a rigorous challenge to the government's budget changes to the age based concessional superannuation contribution limits. Although there have been a few murmurs, nobody has really taken objection to these proposed changes.

In order to bring things into perspective it is worthwhile to provide some historical background. The age based deduction limits under the former regime (for persons age 50 and over) had progressively increased from $62,000 (1994/95) to $105,113 (2006/07) before the $50,000/$100,000 limits came into force on 1 July 2007.

The government has now, in its wisdom, come to the conclusion that $25,000 per annum will be sufficient to accumulate a reasonable "nest egg" for which a taxpayer (and usually his or her spouse) will be able to fund a reasonable retirement income in an uncertain future.

Apart from the uncertainty of future investment returns, we all know that the government pockets 15% before there is any kind of investment return on the balance and the vast majority of superannuation fund members have seen their "nest egg" eroded by at least 30–40 % in recent times, which will probably not be recouped for a very long time - if ever. This state of affairs leaves future contributions as the only means of salvaging the situation for those who wish to recover their losses and regain a semblance of a capital base which can fund a reasonable retirement lifestyle.

It would be interesting to analyse the statistics as to the level of super savings held by taxpayers over the age of 60, excluding those fortunate enough to have maximised their super by contributing generously in the past. That is, looking at those that have not had the opportunity to breach the old RBLs.

Most employees only get the opportunity to save larger sums in their "golden years" of employment when they have (hopefully) paid off their mortgage and their children are no longer dependent upon them for support. This means that they only have a fairly narrow band of years in which they can accumulate a reasonable amount of super savings.

As a means of restoring a degree of fairness, it would be logical to reintroduce a de facto RBL regime so that the high end earners are not unduly advantaged and at the same time allow the previous concessional contribution levels to remain in place. Another strategy could be to allow increased contribution levels for taxpayers over the age of 55 (or 60), rather than having a "one size fits all" from age 50.

It seems anomalous that a government in 1994 considered it reasonable to allow a person to contribute $62,000 into super and the current government (after 15 years of inflation) thinks that $25,000 will be enough!!

If this change goes ahead it will only result in more pressure on future governments to provide more financial support for the aging population who will not have had the chance to adequately provide for their retirement years.

Now is the time for the "grey brigade" to start lobbying the politicians to restore some commonsense on this important issue."

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