The Financial Planning Association of Australia (FPA) has recommended the Government implement a number of changes to superannuation contributions in the upcoming 2017/18 Budget to encourage Australians to self-fund their retirement.
“With an ageing population and the additional pressure this will add to future budgets, the FPA strongly recommends that the Budget reflect policy decisions that are designed to support and encourage today’s working Australians to become self-funded in their retirement,” says the FPA 2017/18 pre-Budget submission.
“Increasing the number of self-funded retirees will greatly assist the Australian economy in many ways, including reducing the reliance and pressure on the Government’s Age Pension. We particularly note the issue of gender inequality in funding retirement outcomes for women.”
Some of the FPA’s recommendations to address this include funding for the Federal Sex Discrimination Commissioner “to monitor and report on the gendered nature of the retirement income gap” and for superannuation be paid on the Paid Parental Leave (PPL) scheme and on carer payments.
“The PPL has been introduced and implementation has been ‘bedded down’. We believe that it is now time to introduce the superannuation component of the PPL.”
Though, in light of the current budgetary constraints, the FPA suggests this could be introduced in increments.
The FPA also calls on the Government to set the concessional contributions cap for those aged 50 and over at twice the cap for those aged under 50. On current levels this would be $60,000, though people aged 50 and over currently have a concessional contributions cap of $35,000. From 1 July 2017 the concessional contributions cap will be set at $25,000 for people both under and over age 50.
“The lead up to retirement (such as the last 10 years of full-time work) is a critical period for retirement preparedness, growing one’s retirement savings. For many Australians, it is these final years of full-time work when they are more likely to be able to afford to make additional voluntary contributions to superannuation.”
The FPA acknowledges the current focus on returning the Budget to surplus, suggesting the concessional contributions cap could be increased in $5,000 increments every two years until it reached $60,000.
Another measure recommended in the pre-Budget submission is for the co-contribution to be returned to its previous level of $1,500, with an increased income threshold.
“The FPA would like to highlight that the current co-contribution scheme only supports those who are working. We recommend the removal of the work-test requirement to extend the co-contribution to people who are temporarily not working such as stay-at-home parents, carers and those on income protection or workers’ compensation insurance benefits.”
The FPA says the cost of this change could be offset by future savings on the age pension and shouldn’t be funded by increased taxes on superannuation.