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Saving for the future has just become harder, with numerous changes in superannuation announced in the recent Federal Budget.
We spoke to ASFA’s Director of Policy and Industry Practice, Melinda Howes, who said that Industry Funds have some timely opportunities to educate their members.
Super contribution cap lowered
“Unfortunately, this reduction is not good news for older employees approaching retirement and trying to catch up. They haven’t had compulsory super their entire working lifetime, and may not have been able to afford to make large lump sum contributions and therefore they might have liked to make high salary sacrifice contributions. That will be limited to a maximum of $25,000 from 1 July 2012.” “Industry Funds could treat this as an opportunity to provide advice to members, encourage high salary sacrifice contributions when possible and offer tailored transition to retirement products,” said Melinda.
Co-contributions reduced
Government matching non concessional contributions for lower income earners will be reduced from 1.5 to dollar-for-dollar after 30 June 2009. ASFA believe that while this is disappointing, at least the Government sees value in this savings incentive and has made assurances that it will return to current levels in five years.
Melinda added: “We recommended that the super co-contribution scheme be accessible to higher income earners as well in five years time.”
New Work Bonus
“On the positive side, ASFA was pleased to see that pensioners will be able to earn some employment income which will not count towards the income test.”
Under the new arrangements, only half of the first $500 of fortnightly employment income will be included in the income test. This means that as a person’s employment income increases, their pension will reduce at a lower rate.
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