While the Federal Government announced in last night’s budget that it will raise the qualifying age for the pension from 65 to 67 progressively over six months from 2017, cuts to concessional superannuation contribution rates appear to have been made without a clear long-term retirement income framework, according to Mercer.
“It is concerning, however, when changes such as the caps on concessional contributions are made in isolation,” he said.
“Tinkering with the system and making piecemeal changes will potentially damage Australians’ confidence in the stability of superannuation rules and halving the cap on concessional contributions may provide short-term budgetary relief, but lacks a long-term plan or foresight.”
Anyone playing catch-up for their retirement income – baby boomers nearing retirement or women out of the workforce for extended periods – will be hit by these changes, he said.
Cuts to the concessional contribution rate disadvantage employees who are nearing retirement or have been out of the workforce for extended periods (such as women), as well as self-employed workers, who have simply not been in a position to contribute to superannuation throughout the majority of their career.
“We are pleased to see that the government co-contribution to super has remained, albeit reduced. It’s a valuable incentive for Australians to save for their retirement via superannuation – and it is important the industry continues to communicate the value of the scheme,” Promnitz said.